M&M Proposition I with No Tax Supports the Argument That

Multiple Choice

M&M Proposition I with no tax supports the argument that:

A) Business risk determines the return on assets.
B) The cost of equity rises as leverage rises.
C) It is completely irrelevant how a firm arranges its finances.
D) A firm should borrow money to the point where the tax benefit from debt is equal to the cost of the increased probability of financial distress.
E) Financial risk is determined by the debt-equity ratio.