1. Is the following statement accurate? Please provide a numerical reasoning to support your claim. A firm that is debt-using with a negative leverage gain will always have a return on equity that is negative.
2. Is the following statement accurate? Please provide a numerical reasoning to support your claim. A firm that has a negative leverage gain can never have a profitability premium that is positive in regards to cash flow
3. A convertible zero-bond that promises $10,000 can be converted into 200 shares of equity at its maturity date. If there are 10,000 such bonds and 1,000,000 shares outstanding, what would the payoff diagram for both bondholders and stockholders look like?