According to the Capital Structure Theory Proposed by the Modigliani

question 64

Multiple Choice

According to the capital structure theory proposed by the Modigliani and Miller (MM) , a firm's optimal capital structure is the mix of debt and equity that minimizes its weighted average cost of capital (WACC) , which occurs when the firm is financed almost entirely with debt. MM argued that their conclusion is valid primarily because, in the real world, ______. 

• A)there are no flotation costs associated with issuing debt
• B)investors pay less personal income taxes on the interest they earn on their investments in bonds than they pay on the dividends they receive from corporations
• C)firms that issue large amounts of debt have much less probability of going bankrupt than firms that have little or no debt in their capital structures.
• D)the amount of debt a firm uses to finance its assets does not affect its market value
• E)interest paid on corporate debt is a tax-deductible expense to the firm, whereas dividends paid to stockholders are not.

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Safeguards designed to reduce the risk of transmission of epidemiologically important microorganisms by direct or indirect contact.