MM Proposition II with No Taxes Supports the Argument That

question 65

Multiple Choice

MM Proposition II with no taxes supports the argument that a firm's:

• A)unlevered equity is risk-free.
• B)cost of equity is inversely related to the firm's debt-equity level.
• C)cost of equity is unaffected by the firm's unlevered cost of capital.
• D)WACC will exceed the unlevered firm's cost of equity.
• E)WACC remains constant even if the firm changes its capital structure.

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Definitions:

Exhibit

To display or demonstrate a particular feature, behavior, or characteristic in a clear or noticeable manner.

Normally Closed

Refers to a switch or relay that is in a closed (conducting) state when not energized.

Contact Configurations

The arrangement and specification of contacts within electrical devices, defining their operational functionalities.

Contactor

An electrically controlled switch used for switching an electrical power circuit, commonly used in motor and lighting applications.