Please select the correct statement.

1. Cost of equity for levered firm decrease with leverage
2. MM theory with corporate tax implies that cost of equity is lower than cost of debt.
3. The term "additional funds needed (AFN)" is generally defined as the funds that a firm must raise externally from non-spontaneous sources, i.e., by selling new stock to support operations
4. The company increases its dividend payout ratio would cause the AFN to decrease