Which One of the Following States That a Firm’s Cost

question 76

Multiple Choice

Which one of the following states that a firm’s cost of equity capital is a positive linear function of the firm' s capital structure?

• A)Static theory of capital structure
• B)M& M Proposition I without taxes
• C)M& M Proposition II without taxes
• D)Homemade leverage theory
• E)M& M Proposition I with taxes

---

Definitions:

Perquisites

Special nonmonetary benefits given to executives; often referred to as perks

Country Club Membership

Affiliation with a private club offering recreational sports and social activities, often including access to golf courses and dining facilities.

Former CEO

An individual who previously held the chief executive officer position in a company, responsible for strategic decision-making and overall management.

Lump-sum Merit Pay

A one-time payment awarded to an employee for exceptional performance, rather than an ongoing salary increase.