MM Shows That in a World with Taxes, a Firm's

question 28

True/False

MM shows that in a world with taxes, a firm's optimal capital structure would be almost 100% debt.

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Definitions:

Common Shares

Shares of ownership in a corporation that grant holders voting rights and a residual claim on the corporation's assets and earnings.

Financing Activities

Transactions and events that affect the long-term liabilities and equity of a company, including issuing debt, selling stock, or paying dividends.

Issue of Shares

Refers to the process by which a corporation issues new shares of stock to raise capital, often to expand or to undertake new projects.

Direct Method

A way of reporting cash flows from operating activities by listing major classes of gross cash receipts and payments.