The proposition that the value of a levered firm is equal to the value of an unlevered firm is known as:
A) MM Proposition I with no tax.
B) MM Proposition II with no tax.
C) MM Proposition I with tax.
D) MM Proposition II with tax.
E) static theory proposition.

Question

Quizplus · Accepted Answer

MM Proposition I with no tax states that the value of a levered firm is equal to the value of an unlevered firm, assuming no taxes and no bankruptcy costs.

The Proposition That the Value of a Levered Firm Is