MM Proposition II,without Taxes,implies That the Required Return on Equity

question 20

Multiple Choice

MM Proposition II,without taxes,implies that the required return on equity is

• A)a result of homemade leverage.
• B)inversely related to the firm's debt-to-equity ratio.
• C)directly affected by the firm's debt-to-equity ratio.
• D)independent of the firm's capital structure.
• E)a linear function of the market's rate of interest.

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Definitions:

Sold at Discount

Refers to items sold below their usual selling price, often to clear inventory or promote sales.

Straight-line Method

The straight-line method is a depreciation technique that allocates an equal amount of depreciation expense on a tangible asset over its useful life.

Amortization

The process of spreading out the cost of an intangible asset over its useful life.

Discount on Bonds Payable

The amount by which a bond's selling price is less than its face value or principal amount, typically reflecting market interest rates higher than the bond's coupon rate.