Which of the Following Statements Is Correct

Which of the following statements is correct?

A) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the number of shares outstanding.
B) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the amortization.
C) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the volatility of those cash flows.
D) Increasing the amount of firm debt increases both the expected cash flows to equity holders and the tax liability.

Correct Answer:

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