Which of the Following Is NOT One of Modigliani and Miller's

question 25

Multiple Choice

Which of the following is NOT one of Modigliani and Miller's set of conditions referred to as perfect capital markets?

• A)All investors hold the efficient portfolio of assets.
• B)There are no taxes,transaction costs,or issuance costs associated with security trading.
• C)A firm's financing decisions do not change the cash flows generated by its investments,nor do they reveal new information about them.
• D)Investors and firms can trade the same set of securities at competitive market prices equal to the present value of their future cash flows.

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Definitions:

Formal Authority

The power given to an individual or group by a recognized entity, typically within an organizational context, to make decisions and direct others.

Rewards

Benefits or compensations provided to individuals or groups in recognition of their performance, efforts, or achievements.

Punishments

Consequences intended to reduce the likelihood of a behavior occurring again, usually seen as unpleasant or undesirable by the recipient.

Expertise

Specialized knowledge or skill in a particular area, acquired through training, study, or experience.