The Modigliani and Miller Hypothesis Does NOT Work in the "Real

question 86

Multiple Choice

The Modigliani and Miller hypothesis does NOT work in the "real world" because

• A) interest expense is tax deductible, providing an advantage to debt financing.
• B) higher levels of debt increase the likelihood of bankruptcy, and bankruptcy has real costs for any corporation.
• C) dividend payments are fixed and tax deductible for the corporation.
• D) both A and B

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Definitions:

Laboratory Value

A numerical result obtained from a laboratory test that measures specific markers in blood, urine, or other body fluids, used to assess health or diagnose conditions.

Calcium

A chemical element and a vital mineral in the human body necessary for bone health, muscle function, and nerve signaling.

Sodium

An essential mineral that plays crucial roles in the body, including maintaining normal fluid balance and supporting nerve and muscle function.

Chloride

A negatively charged ion commonly found in salt compounds, essential for maintaining fluid balance and blood pressure.