A Key Assumption of MM's Proposition I Without Taxes Is

question 39

Multiple Choice

A key assumption of MM's Proposition I without taxes is:

• A)that financial leverage increases risk.
• B)that individuals can borrow on their own account at rates less than the firm.
• C)that individuals must be able to borrow on their own account at rates equal to the firm.
• D)managers are acting to maximize the value of the firm.
• E)All of the above.

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Definitions:

Controlling Interest

Ownership of a majority of a company's stock, allowing for the control of its management and operations.

Subsidiaries

Companies that are fully or partly owned and partly or wholly controlled by another company, known as the parent company.

Investor

An individual or organization that allocates capital with the expectation of receiving financial returns, often through the purchase of securities, real estate, or other investment assets.