Indicate whether each of the following statements is true or false. Support your answers with the relevant explanations. A. Modigliani and Miller’s Proposition II assumes that increased borrowing does not affect the interest rate on the firm’s debt. (Explain your reasoning.)

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Q: All things considered stable cash flows enable higher debt borrowing.

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Q: Q4: From the standpoint of a borrower, is long-term or short-term credit riskier?

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