M&M Proposition 1 Assumes All of the Following Except That

question 19

Multiple Choice

M&M Proposition 1 assumes all of the following except that:

• A) there are no tax.
• B) there are no costs to acquiring information.
• C) there are no transactions costs.
• D) the real investment policy of the company is affected by its capital structure decisions.

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Definitions:

Employer's Payroll Tax

Taxes that employers are required to pay on behalf of their employees, based on the salary the employees earn, including social security and Medicare taxes in the United States.

Federal Unemployment Tax

A tax paid by employers to fund the unemployment benefits provided to workers who have lost their jobs.

State Unemployment Tax

A tax imposed by state governments on employers to fund unemployment insurance benefits for laid-off workers.

Payroll Deductions

Monies withheld from an employee’s paycheck by the employer for taxes, insurance premiums, retirement fund contributions, and other purposes.