M&M Proposition II with Tax Supports the Argument That a Firm's

question 123

Multiple Choice

M&M Proposition II with tax supports the argument that a firm's:

• A) Cost of equity decreases as its weighted average cost of capital decreases.
• B) Cost of equity increases as the firm increases its debt-equity ratio.
• C) Cost of debt varies inversely with the debt-equity ratio.
• D) Use of debt decreases the value of the firm.
• E) Weighted average cost of the capital remains constant as the debt-equity ratio rises.