Modigliani and Miller Followed Up Their Initial Work with a New

question 105

Multiple Choice

Modigliani and Miller followed up their initial work with a new model that incorporated a world with corporate taxes. Which of the statements below result from this model?

• A) A new Proposition I with taxes and it states: All debt financing is optimal.
• B) A new Proposition II with taxes and it states: The WACC of the firm falls as more debt is added.
• C) The more debt sold, the greater the tax shield and the smaller the government's share of the firm.
• D) All of these

---

Definitions:

Egalitarian Ideas

Concepts that promote equality among people, emphasizing fairness and equal rights.

Gender Roles

Social and cultural norms dictating the behaviors, activities, and attributes considered appropriate for men and women in a society.

Housework Duties

Tasks and responsibilities related to maintaining a home, including cleaning, cooking, and chores.

Effective Communication

The exchange of information in a way that the intended message is successfully conveyed, understood, and acted upon by all parties involved.