In relation to M&M Proposition II with no taxes, ﬁnancial risk determines the return on assets.

Name: In relation to M&M Proposition II with no taxes, ﬁnancial risk determines the return on assets.
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M&M Proposition II states that the cost of equity increases with financial leverage, not that financial risk determines the return on assets. The return on assets is determined by the firm's operations, not its capital structure.

In Relation to M&M Proposition II with No Taxes, ﬁNancial