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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Definitions:

Subduction Zone

A region of the Earth's crust where tectonic plates converge, and one plate moves under another, often creating volcanic and seismic activity.

Magma

Molten rock located beneath the Earth's surface, which can form igneous rocks when it cools and solidifies.

Passive Margin

A continental margin that is not associated with a plate boundary and generally experiences less tectonic activity, often featuring thick sediment deposits.

Supercontinent

A massive landmass consisting of all, or nearly all, of the Earth's continents merged together, which has formed and broken apart several times in Earth's history.