M&M Proposition I with No Tax Supports the Argument That

question 378

Multiple Choice

M&M Proposition I with no tax supports the argument that:

• A) Business risk determines the return on assets.
• B) The cost of equity rises as leverage rises.
• C) It is completely irrelevant how a firm arranges its finances.
• D) A firm should borrow money to the point where the tax benefit from debt is equal to the cost of the increased probability of financial distress.
• E) Financial risk is determined by the debt-equity ratio.

---

Definitions:

Enlistments

The act of voluntarily joining the armed forces or a similar organization, often associated with military service.

Soldiers

Individuals serving in an army, whether voluntarily or through conscription, who undergo military training and participate in warfare or peacekeeping missions.

Military Technologies

Advanced technologies developed for the purpose of enhancing the effectiveness and efficiency of armed forces and warfare.

Casualties

People killed, wounded, captured, or missing in war or a major accident.