MM Proposition I States That a Firm's Value Is Unaffected

question 57

Multiple Choice

MM Proposition I states that a firm's value is unaffected by its:

• A)Required rate of return on equity
• B)Operating income, in the absence of taxes
• C)Interest rate paid on debt
• D)Mixture of debt and equity

---

Definitions:

Economic Well-being

The state in which individuals or societies can satisfy their needs and desires, often measured by income, employment, and access to resources.

Taxes Affect

Describes how taxes influence economic decisions and behaviours of individuals and businesses, including consumption, investment, and savings.

Labor Supply

The total hours that workers are willing and able to work at a given wage rate, within an economy.

Inelastic

A situation in which the demand or supply for a good or service is relatively unresponsive to changes in price.