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

question 59

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.

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Definitions:

Mythological Creature

A mythical being or legendary animal often featured in folklore or cultural stories, known for its unique powers or characteristics.

Folklore

The traditional beliefs, customs, stories, songs, and practices of a culture, passed through generations by word of mouth.

Incarceration Rates

The number of individuals within a population who are confined in prison or jail, expressed per 100,000 of the population.

Overrepresented

The state of being represented in a disproportionately high quantity relative to the actual population or occurrence rate.