Which of the Following Statements Concerning the MM Extension with Growth

question 27

Multiple Choice

Which of the following statements concerning the MM extension with growth is NOT CORRECT?

• A) The tax shields should be discounted at the unlevered cost of equity.
• B) The value of a growing tax shield is greater than the value of a constant tax shield.
• C) For a given D/S, the levered cost of equity is greater than the levered cost of equity under MM's original (with tax) assumptions.
• D) For a given D/S, the WACC is less than the WACC under MM's original (with tax) assumptions.
• E) The total value of the firm increases with the amount of debt.