Which of the Following Is NOT a Conclusion Drawn from M&M's

question 90

Multiple Choice

Which of the following is NOT a conclusion drawn from M&M's Propositions 1 and 2?

• A) Firm value is determined by the left hand of the balance sheet, the firm's assets, and the cash flow generated by them.
• B) A firm can change its market value by splitting its cash flows into different streams.
• C) Shareholder's required return rises with leverage.
• D) The WACC does not change as capital structure change.
• E) The WACC is determined by the riskiness of the company's business (assets).

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Definitions:

Before-Tax Income

Market income plus transfers.

Payroll Tax

Taxations placed upon employers or employees, usually based on a percentage of the income that employees receive from their employers.

Social Security System

A government program designed to provide financial support to people in retirement, disability, or to survivors, funded through payroll taxes.

Unemployment Benefits

Payments made by the government or a private entity to individuals who are unable to find employment.