MM Proposition I with Tax Is Based on the Concept

question 59

Multiple Choice

MM Proposition I with tax is based on the concept that the:

• A)optimal capital structure is the one that is totally financed with equity.
• B)capital structure of the firm does not matter because investors can use homemade leverage.
• C)firm is worse off levered than unlevered.
• D)value of the firm increases as total debt increases because of the interest tax shield.
• E)cost of equity increases as the debt-equity ratio of a firm increases.

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Definitions:

Budget Overruns

The situation when the actual spending exceeds the planned or budgeted amount.

Feedback Control

A management technique that involves using information about the output of a system to adjust inputs in order to achieve desired levels of performance.

Concurrent Control

refers to management activities that monitor and assess employee activities or work processes in real-time to ensure standards are being met.

Improve Things

Enhancing or making better various aspects, situations, or objects.