Question: determine whether each statement is True or False. If false, state the correct statement. 1) By increasing the amount paid to debt holders through interest

determine whether each statement is True or False. If false, state the correct statement.

1) By increasing the amount paid to debt holders through interest payments, the amount of the pre-tax cash flows that must be paid as taxes increases.

2) Corporate taxes lower the effective cost of debt financing, which translates into a reduction in the weighted average cost of capital.

3) We account for the benefits of the interest tax shields by adjusting the firms free cash flows.

4) The total value of the unlevered firm exceeds the value of the firm with leverage due to the present value of the tax savings from debt.

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