M & M Proposition II Is the Proposition That

question 50

Multiple Choice

M & M Proposition II is the proposition that:

• A)the capital structure of a firm has no effect on the firm's value.
• B)the cost of equity depends on the return on debt, the debt-equity ratio, and the tax rate.
• C)a firm's cost of equity is a linear function with a slope equal to (R_A - R_D).
• D)the cost of equity is equivalent to the required rate of return on a firm's assets.
• E)the size of the pie does not depend on how the pie is sliced.

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