Which One of These Events Might Cause the Biggest Challenge

question 51

Multiple Choice

Which one of these events might cause the biggest challenge to the MM propositions?

• A)An increase in the corporate tax rates
• B)A decrease in the cost of debt
• C)An increase in a firm's unlevered WACC
• D)A new law requiring equal lending rates for all borrowers
• E)A change in tax laws to treat interest and dividends equally

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Definitions:

Marginal Cost

The increase in expenditure incurred from making one more unit of a product or service.

Marginal Benefit

The extra benefit or utility received from the consumption or production of an additional unit of a product or service.

Public Goods

Goods or services that are available for consumption by everyone and where use by one individual does not reduce availability to others.

Private Philanthropy

Financial donations made by private individuals or organizations to charitable causes, often aimed at public welfare improvement.