Under MM‐Proposition I—with no taxes, an increase in the proportion of debt in the capital structure results in: Group o

[answerhappygod]

Under MM‐Proposition I—with no taxes, an increase in the
proportion of debt in the capital structure results in:
Group of answer choices
No impact on future cash flows and no impact on the cost of
capital.
A decrease in future cash flows and a decrease in the cost of
capital.
An increase in future cash flows and an increase in the cost of
capital.
MM Proposition II—without taxes most
likely asserts that:
Group of answer choices
As the proportion of debt in a company’s capital structure
increases, its weighted average cost of capital decreases.
As the proportion of debt in a company’s capital structure
increases, its cost of equity also increases.
A company’s capital structure has no impact on its market
value.
Consider the following statements:
Statement 1: The pecking order theory
implies that issuance of debt usually sends a positive signal about
the company to the market.
Statement 2: The pecking order theory
implies that managers tend to issue equity when they believe that
the company’s stock is undervalued.
Which of the following is most likely?
Group of answer choices
Only Statement 2 is incorrect.
Both statements are correct.
Only Statement 1 is incorrect.