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:

Maturity Stage

A phase in the product life cycle where growth in sales has started to slow down, and the product is established in the market.

Entrepreneurial Firms

Companies focused on innovation, rapid growth, and high risk, often in emerging industries or markets.

Growth

The process of increasing in size, number, value, or strength, often used in contexts of individual development, economic progress, or business expansion.

Takeoff

In business, refers to the phase where a product or company experiences rapid growth after initial establishment. In aviation, it describes the act of an aircraft becoming airborne.