MM's Proposition II States That the Expected Return on Assets

question 107

True/False

MM's proposition II states that the expected return on assets increases as the debt-equity ratio increases.

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Definitions:

Useful Life

The estimated duration of time a fixed asset is expected to be economically usable by an entity.

Straight-Line Method

This is a depreciation method where an equal amount of the asset's cost is allocated as an expense each year over its useful life.

Salvage Value

The expected residual cost of an asset by the end of its functional life.

Commercial Substance

A criterion indicating that a transaction significantly changes the economic position or cash flows of a company.