Firm M Is a Mature Firm in a Mature Industry

Firm M is a mature firm in a mature industry. Its annual net income and net cash flow are both consistently high and very stable. The company's growth prospects are quite limited; therefore, the company's capital budget is small relative to its net income. Firm N is a relatively new firm in a new industry. Its annual operating income fluctuates considerably, but the company has substantial growth opportunities. Its capital budget is expected to be large relative to its net income for the foreseeable future. Which of the following statements is most correct?

A) Firm M probably has a lower debt ratio than Firm N.
B) Firm M probably has a higher distribution ratio (the total of dividend payout ratio and stock repurchase ratio) than Firm N.
C) If the corporate tax rate increases, the debt ratio of both firms is likely to fall.
D) Statements a and b are correct.
E) Statements b and c are correct.