The Following Structure Is Shown in What Form

question 86

Multiple Choice

The following structure is shown in what form?

• A)a D form
• B)an L form
• C)neither D nor L
• D)both D and L

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Definitions:

M&M Proposition I

A principle of corporate finance stating that, under certain conditions, the value of a company is not affected by how it is financed, regardless of whether the company is financed by debt or equity.

Value of the Firm

The total worth of a company based on its current market capitalization plus any debts, and minus any cash on the company's balance sheet.

Interest Tax Shield

The decrease in income tax liabilities due to permitted interest expense deductions.

Levered Firm

A corporation that has debt in its capital structure, indicating it uses borrowing (leverage) to finance its operations or expansions.