In a World of No Corporate Taxes If the Use

question 63

Multiple Choice

In a world of no corporate taxes if the use of leverage does not change the value of the levered firm relative to the unlevered firm this is known as:

• A)MM Proposition III that the cost of equity is less than the cost of debt.
• B)MM Proposition I that leverage is invariant to market value.
• C)MM Proposition II that the cost of equity is always constant.
• D)MM Proposition I that the market value of the firm is invariant to the capital structure.
• E)MM Proposition III that there is no risk associated with leverage in a no tax world.

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