Which One of the Following Statements Is Correct in Relation

Multiple Choice

Which one of the following statements is correct in relation to M&M Proposition II, without taxes?

A) The cost of equity remains constant as the debt-equity ratio increases.
B) The cost of equity is inversely related to the debt-equity ratio.
C) The required return on assets is equal to the weighted average cost of capital.
D) Financial risk determines the return on assets.
E) Financial risk is unaffected by the debt-equity ratio.