Which of the Following Statements Correctly Relate to M&M Proposition

question 21

Multiple Choice

Which of the following statements correctly relate to M&M Proposition I,with taxes?
I.Debt decreases the value of a firm.
II.The levered value of a firm exceeds the firm's unlevered value.
III.The weighted average cost of capital (WACC) is constant.
IV.The optimal capital structure is zero debt.

• A)II only
• B)I,III,and IV only
• C)I and IV only
• D)I only
• E)II and III only

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