M & M Proposition I with No Tax Supports the Argument

question 60

Multiple Choice

M & M Proposition I with no tax supports the argument that:

• A)business risk determines the return on assets.
• B)the cost of equity rises as leverage rises.
• C)the debt-equity ratio of a firm is completely irrelevant.
• D)a firm should borrow money to the point where the tax benefit from debt is equal to the cost of the increased probability of financial distress.
• E)homemade leverage is irrelevant.

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Definitions:

Research Evidence

Research evidence comprises findings or data obtained from methodological scientific inquiry used to support or refute hypotheses.

Chromosomes

Thread-like structures located inside the nucleus of animal and plant cells, made of protein and a single molecule of DNA, which carry genetic information.

Nucleus

In biology, the membrane-bound organelle in a cell that contains genetic material; in physics, the positively charged center of an atom composed of neutrons and protons.

Red Blood Cells

Cells in the blood that transport oxygen from the lungs to body tissues and carbon dioxide from tissues back to the lungs.