Question: Sheila makes two comments regarding the static tradeoff theory Comment 3: As the proportion of debt in a firm rises, the value of the levered

Sheila makes two comments regarding the static tradeoff theory Comment 3:

Sheila makes two comments regarding the static tradeoff theory Comment 3: "As the proportion of debt in a firm rises, the value of the levered firm initially falls and then rises." Comment 4: "As the proportion of debt in a firm rises, its after-tax cost of debt initially falls and then rises." Are Sheila's comments about the static tradeoff theory correct? A No for Comment 3 and Comment 4. B Yes for Comment 3 and No for Comment 4. C No for Comment 3 and Yes for Comment 4

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