Which of the Following Statements Are Correct in Relation to MM

question 43

Multiple Choice

Which of the following statements are correct in relation to MM Proposition II with no taxes?
I.The return on assets is equal to the weighted average cost of capital.
II.Financial risk is determined by the debt-equity ratio.
III.Financial risk determines the return on assets.
IV.The cost of equity declines when the amount of leverage used by a firm rises.

• A)I and III only
• B)II and IV only
• C)I and II only
• D)III and IV only
• E)I and IV only

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