Which one of the following is an implication of M&M Proposition II,without taxes?
A)The risk of equity depends on both the degree of financial leverage and the riskiness of the firm's operations.
B)WACC decreases as the debt-equity ratio increases.
C)WACC is unaffected by the capital structure of a firm.
D)A firm's optimal capital structure is 100 per cent debt.
E)A firm's capital structure is irrelevant.

Question

Quizplus · Accepted Answer

According to M&M Proposition II without taxes, the risk of equity is influenced by both the firm's financial leverage and the riskiness of its operations.

Which One of the Following Is an Implication of M&M