Modigliani and Miller assumed that firms pay out all of their earnings as dividends. Therefore, they theorized that firms do not grow. Firms do grow, however, and as capital structure theory advanced, an extension to the MM model with taxes was developed that incorporated growth. Indicate whether each of the following statements about the MM model and the extension for growth is true or false. a. If a firm has debt, the tax benefit Of debt grows as the firm grows.
b. Using the MM extension for growth, a growing firm's WACC is greater than the WACC under MM's original (with tax) assumptions.
c. The tax shield should be discounted at the unlevered cost of equity.
d. Using the MM extension for growth, a growing firm's levered cost of equity is less than the levered cost of equity under MM's original (with tax) assumptions.