Which One of the Following Statements Is False According to MM's

question 90

Multiple Choice

Which one of the following statements is false according to MM's proposition I?

• A) Firm value is unaffected by the firm's capital structure.
• B) Proposition I is also called the debt-irrelevance proposition.
• C) Shareholders should care about the firm's debt policy.
• D) After restructuring, the firm's value should be the same as it was prior to restructuring.

---

Definitions:

Average Rate of Return

A method of determining the profitability of an investment by dividing the average annual profit by the initial investment cost.

Total Income

The sum of all revenues and gains that a person or business receives over a period of time, before any expenses are subtracted.

Average Rate of Return

A metric that determines the earnings from an investment by dividing the mean yearly profit by the cost of the initial investment.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts.