Question: M&M Proposition I with taxes is based on the concept that: The optimal capital structure is the one that is totally financed with equity. The

M&M Proposition I with taxes is based on the concept that:

The optimal capital structure is the one that is totally financed with equity.
The capital structure of a firm does not matter because investors can use homemade leverage.
A firm's WACC is unaffected by a change in the firm's capital structure.
The value of a firm increases as the firm's debt increases because of the interest tax shield.
The cost of equity increases as the debt-equity ratio of a firm increases.

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