MM's Proposition II States That The

question 5

Multiple Choice

MM's proposition II 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 value determination.
• D) greater the proportion of equity, the higher the expected return on debt.

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Definitions:

Spending

The act of disbursing money or resources for various purposes, including procurement, operations, and investments.

IRR

Internal Rate of Return, a financial metric used to evaluate the profitability of potential investments.

Net Cash Flow

The difference between a company's cash inflows and outflows within a specified period.

Calculation

The process of determining something by mathematical or logical methods.