A Firm Increases Its Financial Leverage When Its ROA Is

Multiple Choice

A firm increases its financial leverage when its ROA is greater than the cost of debt. Everything else equal, this change will probably increase the firm's:
I. Beta
II. Earnings variability over the business cycle
III. ROE
IV. Stock price

A) I and II only
B) III and IV only
C) I, III, and IV only
D) I, II, and III only