Which Statement Correctly Describes Proposition I of Modigliani and Miller

question 65

Multiple Choice

Which statement correctly describes proposition I of Modigliani and Miller?

• A) The value of the firm is independent of its capital structure.
• B) If there is no default risk,firms should exclusively use debt to finance projects.
• C) If there is no default risk,firms should exclusively use equity to finance projects.
• D) The value of the firm's tax shields depends solely on the amount of debt issued.

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Definitions:

Milgram Study

A collection of experiments in social psychology by Stanley Milgram that gauged how likely individuals were to follow orders from an authoritative figure that went against their own moral judgment.

Shock Intensities

Various levels of electrical current applied during experiments or treatments, which can range from mild to severe.

Cognitive Strategy

Techniques or methods employed to facilitate problem-solving, learning, or understanding.

Immoral Orders

Directives from an authority that are unethical or morally wrong, often posing ethical dilemmas for the person receiving the orders.