M&M Proposition II Is the Proposition That

question 256

Multiple Choice

M&M Proposition II is the proposition that:

• A) Supports the argument that the capital structure of a firm is irrelevant to the value of the firm.
• B) The cost of equity depends on the return on debt, the debt-equity ratio and the tax rate.
• C) A firm's cost of equity capital is a positive linear function of the firm's capital structure.
• D) The cost of equity is equivalent to the required return on the total assets of a firm.
• E) Supports the argument that the size of the pie does not depend on how the pie is sliced.

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Definitions:

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Connections between individuals that are influenced by social networks, norms, and interactions.

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Reasons or explanations provided to support or rationalize decisions, actions, or beliefs.

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