Which of the Following Is True of the Modigliani-Miller Theorem

question 18

Multiple Choice

Which of the following is true of the Modigliani-Miller theorem in the absence of taxes and transaction costs?

• A)Hedging is unlikely to improve a firm's value if it does no more than reduce the variance of its future cash flows.
• B)To improve a firm's value,hedging must increase expected cash flows.
• C)If hedging choices do not affect cash flows from real assets,hedging decisions do not affect firm values.
• D)To improve a firm's value,hedging must decrease expected cash flows.

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Definitions:

Thinking Globally

The ability to understand and appreciate cultural differences and apply this awareness in business strategies or social interactions on a global scale.

Acting Locally

An approach focused on addressing issues and making positive changes within one's own community or region.

Compensation Systems

The methods and guidelines used by an organization to determine how employees are paid, including wages, salaries, bonuses, and benefits.

Decentralized Style

A management approach where decision-making is distributed among various levels within the organization, often empowering local or lower-level managers.