Under the Simplifying Assumptions of Modigliani and Miller,an Increase in a Firm's

question 37

Multiple Choice

Under the simplifying assumptions of Modigliani and Miller,an increase in a firm's financial leverage will:

• A) increase the variability in earnings per share.
• B) reduce the operating risk of the firm.
• C) increase the value of the firm.
• D) decrease the value of the firm.

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Definitions:

Unconscious

The part of the mind that is inaccessible to the conscious mind but that affects behavior and emotions.

Hallucinogenic

Substances that cause hallucinations - perceptions and sensations that appear real though they are not actually present in the external environment.

Sensation

The sense organs’ detection of external physical stimulus and the transmission of information about this stimulus to the brain.

Perception

The process by which individuals select, organize, and interpret sensory information to understand their environment.