Which of the Following Is True of the Assumptions Outlined

question 10

Multiple Choice

Which of the following is true of the assumptions outlined by the capital structure theory published by Professors Franco Modigliani and Merton Miller (MM) ?

• A) Personal income taxes are deductible.
• B) Brokerage costs do not exist.
• C) The value of the firm will be maximized by financing completely through equity.
• D) A high debt/assets ratio decreases the value of the firm.
• E) Bankruptcy costs are high when the firm uses no debt.

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Definitions:

Political Borders

Imaginary lines that define the boundary of a nation or state, separating it from other nations or states.

Exploitation

The action or fact of treating someone unfairly in order to benefit from their work or resources.

Privilege

Unearned advantage accorded to members of dominant social groups (males, whites, heterosexuals, the physically able, etc.).

Unearned

Income or benefits received without a direct exchange of goods or services, such as inheritance, gifts, or subsidies.