Part II. On the excel sheet, indicate if each statement below is True or False. (30 points)

1) As financial leverage increases, the cost of equity will increase

2) As fixed costs increases, the degree of operating leverage will decrease

3) As the level of sales increases, and assuming a given positive level of fixed costs, the degree of operating leverage should decrease.

4) According to Modigliani and Miller, the optimal financing mix should be all debt if interest payments are tax deductible.

5) As leverage increases, stockholder will prefer less risky projects

6) The optimal financing decision is one that minimizes the ATWACOC