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:

Ethical Dilemmas

Situations in which a difficult choice must be made between two or more conflicting moral principles.

Conflicting Values

Describes a situation where two or more values or moral principles are in opposition, making it difficult to make a decision or take an action.

Unequal Power

A situation or relationship where power or authority is distributed unevenly among the parties involved.

Accountability

The obligation to explain, justify, and take responsibility for one's actions to oneself or others.