MM's Proposition II Without Taxes States That The

question 25

Multiple Choice

MM's proposition II without taxes states that the:

• A) expected return on equity increases as financial leverage increases.
• B) expected return on assets decreases as expected return on debt decreases.
• C) firm's capital structure is irrelevant to the firm's overall value.
• D) greater the proportion of equity, the higher the expected return on debt.

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Definitions:

Current Spouse

The legally recognized partner one is married to at present.

Acquaintance

A person one knows slightly, but who is not a close friend.

Stranger

An individual who is not known personally or is unfamiliar.

Psychodynamic

A psychological perspective that emphasizes the complex interplay of unconscious and conscious forces that shape personality and behavior.