Which One of the Following Is an Implication of M&M

question 7

Multiple Choice

Which one of the following is an implication of M&M Proposition II,without taxes?

• A)The risk of equity depends on both the degree of financial leverage and the riskiness of the firm's operations.
• B)WACC decreases as the debt-equity ratio increases.
• C)WACC is unaffected by the capital structure of a firm.
• D)A firm's optimal capital structure is 100 per cent debt.
• E)A firm's capital structure is irrelevant.

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