Which one of the following states that the value of a company is unrelated to the company's capital structure?
A) Homemade leverage
B) M&M Proposition I, no tax
C) M&M Proposition II, no tax
D) Pecking-order theory
E) Static theory of capital structure

Question

Quizplus · Accepted Answer

M&M Proposition I, no tax states that the value of a company is independent of its capital structure. In other words, the value of the company is determined by its ability to generate cash flows and not by the way it finances its operations. This proposition assumes perfect markets, no transaction costs, no taxes, and that investors have the same access to information.

Which One of the Following States That the Value of a Company