Which One of These Statements Corresponds to MM Proposition I

question 50

Multiple Choice

Which one of these statements corresponds to MM proposition I without taxes?

• A) Debt interest has no effect on either equity income or firm value.
• B) Debt interest reduces equity income and increases firm value.
• C) Debt interest reduces equity income but does not affect firm value.
• D) The value of a firm increases as its debt-equity ratio increases.

---

Definitions:

High-Performance Work Practices

A set of management practices that aim to enhance organizational performance by improving employee involvement, commitment, and competencies.

Competitive Advantage

A condition or circumstance that puts a company in a favorable or superior business position compared to its competitors.

Human Capital

Human capital represents the knowledge, skills, competencies, and attributes embodied in individuals that facilitate the creation of personal, social, and economic well-being.

Triple Bottom Line

An accounting framework that incorporates three dimensions of performance: social, environmental, and financial.