Which One of These Is Not an Underlying Assumption of MM

question 53

Multiple Choice

Which one of these is not an underlying assumption of MM Proposition I?

• A) Capital markets function well.
• B) Investors can borrow or lend on the same terms as firms.
• C) Taxes remain at their current non-zero levels.
• D) Securities are fairly priced.

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Definitions:

LIFO

Last In, First Out, an inventory valuation method that assumes goods purchased last are the first ones sold, affecting the cost of goods sold and inventory valuation.

FIFO

First-In, First-Out; an inventory valuation method where goods first purchased or produced are sold or used first.

IFRS

International Financial Reporting Standards, which are a set of global accounting standards.

LIFO

Last-In, First-Out method, an inventory valuation technique where the latest items added to inventory are the first ones to be used or sold.