Question: M&M Proposition I with taxes is based on the concept that: Multiple Choice The cost of equity increases as the debt - equity ratio of

M&M Proposition I with taxes is based on the concept that:
Multiple Choice
The cost of equity increases as the debt-equity ratio of a firm increases.
The value of the firm increases as total debt increases because of the interest tax shield.
The optimal capital structure is the one that is totally financed with equity.
The firm is better off with debt based on the weighted average cost of capital.
The capital structure of the firm does not matter because investors can use homemade leverage.

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