The Contribution of M&M Comes from the Fact That There

question 121

Multiple Choice

The contribution of M&M comes from the fact that there is a constant trade-off ratio.Which of the statements below describe this constant trade-off ratio?

• A)When a firm adds more low cost debt,it automatically increases the cost of equity so that the overall cost of capital remains constant.
• B)When a firm adds more low cost debt,it automatically increases the cost of equity so that the overall cost of capital increases.
• C)When a firm adds more low cost debt,it automatically increases the cost of equity so that the overall cost of capital decreases.
• D)None of these

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Definitions:

Bootstrap

A statistical method that resamples a single dataset to create many simulated samples to estimate the distribution of an estimator.

Permutation

An arrangement of all or part of a set of objects, with regard to the order of the arrangement.

Residential Properties

Properties designed for people to live in, including houses, apartments, condos, and townhomes.

Permutation Test

A nonparametric statistical test method used to determine if two or more samples come from the same distribution.