Which Three of the Following Are Modigliani and Miller's Three

question 24

Multiple Choice

Which three of the following are Modigliani and Miller's three propositions for a perfect no- tax world?

• A) The total market value of any company is independent of its capital structure.
• B) The expected rate of return on equity increases proportionately with the gearing ratio.
• C) The effect of gearing is to magnify the degree of variation in a firm's income for shareholders' returns.
• D) The cut- off rate of return for new projects is equal to the weighted average cost of capital - which is constant regardless of gearing.

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Definitions:

Salty

One of the basic tastes, often associated with the presence of sodium ions.

Receptor Cells

Specialized cells that detect specific types of energy (e.g., light, sound, chemicals) and convert them into neural signals for the brain to process.

Taste Bud

A sensory organ found on the tongue that perceives taste, including sweet, sour, salty, bitter, and umami.

Supertasters

Individuals with a heightened sense of taste, often having a higher density of taste buds on their tongue.