The Contribution of M&M Comes from the Fact That There

Multiple Choice

The contribution of M&M comes from the fact that there is a constant trade-off ratio.Which of the statements below describe this constant trade-off ratio?

A) When a firm adds more low cost debt,it automatically increases the cost of equity so that the overall cost of capital remains constant.
B) When a firm adds more low cost debt,it automatically increases the cost of equity so that the overall cost of capital increases.
C) When a firm adds more low cost debt,it automatically increases the cost of equity so that the overall cost of capital decreases.
D) None of these