M&M Proposition I with Tax States That the Value of a Levered

question 359

Multiple Choice

M&M Proposition I with tax states that the value of a levered firm increases as the:

• A) Level of debt decreases.
• B) Tax rate of the firm decreases.
• C) Debt-equity ratio increases.
• D) Unlevered value of the firm decreases.
• E) Inflation rate increases.

---

Definitions:

FOB Destination

A term in shipping indicating that the seller retains ownership and responsibility for the goods until they are delivered to the buyer's location.

Prepaid Freight Costs

Expenses paid in advance for the transportation of goods, often included in the inventory cost.

Sales Amount

The total revenue generated from the sale of goods or services over a specific period.

FOB Destination

A shipping term indicating that the seller is responsible for the goods and the cost of transport until they are delivered to the buyer's location.