The Modigliani and Miller Hypothesis Does NOT Work in the "Real

question 83

Multiple Choice

The Modigliani and Miller hypothesis does NOT work in the "real world" because

• A)interest expense is tax deductible,providing an advantage to debt financing.
• B)higher levels of debt increase the likelihood of bankruptcy,and bankruptcy has real costs for any corporation.
• C)both A and B.
• D)dividend payments are fixed and tax deductible for the corporation.