Which of the Following Statements Are Correct in Relation to M

question 30

Multiple Choice

Which of the following statements are correct in relation to M & M Proposition II with no taxes?
I.The required return on assets is equal to the weighted average cost of capital.
II.Financial risk is determined by the debt-equity ratio.
III.Financial risk determines the return on assets.
IV.The cost of equity declines when the amount of leverage used by a firm rises.

• A)I and III only
• B)II and IV only
• C)I and II only
• D)III and IV only
• E)I and IV only

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Definitions:

Psychogenic Need

A term referring to emotional or psychological needs that influence an individual's mental health and behavior, rather than physical needs.

Basic Elements

Fundamental components or building blocks that form the basis or essentials of a larger system, concept, or structure.

Trait Approach

A methodology in psychology focused on the identification and measurement of specific personality traits as key components in understanding human behavior.

Trait Researchers

Psychologists who study characteristics that are consistent over time and across situations, focusing on identifying and measuring individual differences in personality.