Select the statement that is most correct. In a profitable firm with a degree of operating...
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Select the statement that is most correct. In a profitable firm with a degree of operating leverage greater than one, increasing sales will lead to a more than proportional increase in net income. OA firm's optimal capital structure will maximize the cash flow (net income) available to the equity investors. When a firm increases the amount of debt in its capital structure and becomes more highly levered, the firm's WACC will go down and a project's NPV will go up, but the increase in interest expense will also lead to smaller operating cash flows and a reduction in the project's IRR. O Modigliani and Miller conclusively showed that the amount of debt in a firm's capital structure is totally irrelevant, even when corporate taxes are considered. O The more highly levered a firm is, the less risk there is to bondholders, since they will then control more votes when it comes time to elect the board of directors at the firm's annual meeting. Select the statement that is most correct. In a profitable firm with a degree of operating leverage greater than one, increasing sales will lead to a more than proportional increase in net income. OA firm's optimal capital structure will maximize the cash flow (net income) available to the equity investors. When a firm increases the amount of debt in its capital structure and becomes more highly levered, the firm's WACC will go down and a project's NPV will go up, but the increase in interest expense will also lead to smaller operating cash flows and a reduction in the project's IRR. O Modigliani and Miller conclusively showed that the amount of debt in a firm's capital structure is totally irrelevant, even when corporate taxes are considered. O The more highly levered a firm is, the less risk there is to bondholders, since they will then control more votes when it comes time to elect the board of directors at the firm's annual meeting.
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