Which Statement Concerning Capital Structure Theory Is NOT True

question 33

Multiple Choice

Which statement concerning capital structure theory is NOT true?

• A)The major contribution of Miller's theory is that it demonstrates that personal taxes decrease the value of using corporate debt.
• B)Under MM with zero taxes, financial leverage has no effect on a firm's value.
• C)Under MM with corporate taxes, the value of a levered firm exceeds the value of the unlevered firm by the product of the tax rate times the market value dollar amount of debt.
• D)Under MM with corporate taxes, r_s increases with leverage, and this increase exactly offsets the tax benefits of debt financing.

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