M&M Proposition II, Without Taxes, States That The

question 68

Multiple Choice

M&M Proposition II, without taxes, states that the:

• A)capital structure of a firm is highly relevant.
• B)weighted average cost of capital decreases as the debt-equity ratio decreases.
• C)cost of equity increases as a firm increases its debt-equity ratio.
• D)return on equity is equal to the return on assets multiplied by the debt-equity ratio.
• E)return on equity remains constant as the debt-equity ratio increases.

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Definitions:

Senior Leadership

Refers to the highest level of management within an organization, responsible for strategic decisions and leading the organization towards its objectives.

Cultures

The collective norms, values, customs, and practices that define a group or society.

Egos

A person's sense of self-esteem or self-importance.

Corporate Integration

The process of combining different companies or business functions within a corporation to create a more efficient and unified entity.