Harvard Business School Finance Course With 100% Correct Screen Shots Solutions Of Mentioned Questions The cost of debt is generally lower than the cost of equity. Top of Form True False Bottom of Form M&M’s Proposition I states that a company’s value is independent of its capital structure. Top of Form True False Bottom of Form A higher level of leverage generally reduces managerial discretion. Top of Form True False Bottom of Form The Pecking Order Theory of capital structure implies a unique optimum capital structure. Top of Form True False Bottom of Form As EBIT drops, the return on equity (ROE) of a levered firm drops ______ the ROE of an otherwise identical unlevered firm. Top of Form