Which of the Following Will Increase the Value of a Levered

question 24

Multiple Choice

Which of the following will increase the value of a levered firm according to M&M Proposition I, with taxes? I. decrease in the amount of the debt
II) increase in the value of the unlevered firm
III) decrease in the tax rate
IV) increase in the interest rate on the debt

• A) II only
• B) I and IV only
• C) II and III only
• D) II and IV only
• E) II, III, and IV only

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Definitions:

Brain Drain

The emigration of highly trained or intelligent people from a particular country, often due to lack of opportunities or political instability.

Human Capital

The economic value of a person's experience and skills, including education, training, intelligence, skills, health, and other things employers value.

Low-income Countries

are nations with a gross national income (GNI) per capita below a certain threshold defined by international institutions like the World Bank.

High-income Countries

Nations with a high gross national income per capita compared to other countries.