MM Proposition II,without Taxes,is the Proposition That

question 25

Multiple Choice

MM Proposition II,without taxes,is the proposition that

• A)supports the argument that the capital structure of a firm is irrelevant to the value of the firm.
• B)a firm's cost of equity increases in direct relationship to the increase in debt.
• C)the cost of levered equity is determined solely by the return on debt,the debt-equity ratio,and the tax rate.
• D)the cost of equity depends on the market value of the firm's assets.
• E)supports the argument that the size of the pie does not depend on how the pie is sliced.

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Definitions:

Stocks

Financial instruments representing ownership in a company or corporation, offering a claim to part of the corporation's assets and profits.

Equity Securities

Financial instruments representing ownership in a company, such as stocks, which give shareholders voting rights and potential dividends.

Ownership

The state or fact of legal possession and control over property, which can include goods, land, or intellectual property.

Third Party

An entity or individual that is not directly involved in a transaction or agreement but may be affected by it or have an interest in it.