In the Context of the M&M Irrelevance Theorem, in the Absence

question 17

Multiple Choice

In the context of the M&M Irrelevance theorem, in the absence of taxes and bankruptcy costs, which of the following is true?

• A)The total value of the firm is dependent on the firm's capital structure.
• B)Investors can undo the leverage that the corporation has undertaken.
• C)Adding debt to the capital structure creates value.
• D)Shareholders will pay a premium for shares merely because a firm chooses to introduce financial leverage.

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Definitions:

Silence

The absence of sound or the act of refraining from speaking; in legal contexts, it can imply consent or acceptance under certain conditions.

Acceptance

In contract law, acceptance refers to the expression of agreement to the terms of an offer, resulting in a contract.

Forbearance To Act

Refers to a legal principle involving the deliberate abstention from enforcing a right.

Contractual Agreement

A legally binding agreement between two or more parties outlining their rights and obligations.