Which Statement Concerning Capital Structure Theory Is NOT True

question 33

Multiple Choice

Which statement concerning capital structure theory is NOT true?

• A)The major contribution of Miller's theory is that it demonstrates that personal taxes decrease the value of using corporate debt.
• B)Under MM with zero taxes, financial leverage has no effect on a firm's value.
• C)Under MM with corporate taxes, the value of a levered firm exceeds the value of the unlevered firm by the product of the tax rate times the market value dollar amount of debt.
• D)Under MM with corporate taxes, r_s increases with leverage, and this increase exactly offsets the tax benefits of debt financing.

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Definitions:

Observational

Relating to the gathering of information through direct observation, without intervening or altering natural events, used extensively in scientific research.

Antipredator Response

Behavioral or physiological strategies employed by prey animals to avoid or deter predators.

Predator Distraction Hypothesis

A theory explaining certain animal behaviors or characteristics as tactics to divert a predator's attention away from the most vulnerable members of a group.

Gull Behavior

The various actions and responses characteristic of gulls, including feeding strategies, social structure, and migration patterns.