Which one of these presents the idea that the cost of equity is a positive linear function of capital structure?
A)MM Proposition I without taxes
B)MM Proposition II with and without taxes
C)Capital asset pricing model
D)MM Proposition I with taxes
E)Homemade leverage

Question

Quizplus · Accepted Answer

MM Proposition II with and without taxes states that the cost of equity increases linearly with the increase in debt-equity ratio, reflecting the increased risk to equity holders as leverage increases.

Which One of These Presents the Idea That the Cost