Which of the following statements is true?
A) With zero taxes and zero bankruptcy costs, the value of the firm is independent of its debt-equity ratio.
B) With taxes and zero bankruptcy costs, the value of the firm reaches a maximum and then declines as the debt-equity ratio increases.
C) With taxes and bankruptcy costs, the value of the firm reaches a maximum when firms maximize their debt.
D) All of the above are true

Question

Quizplus · Accepted Answer

In a world with zero taxes and zero bankruptcy costs, according to Modigliani and Miller Proposition I, the value of the firm is indeed independent of its debt-equity ratio.

Which of the Following Statements Is True