MM Proposition II with taxes:
A) has the same general implications as MM Proposition II without taxes.
B) reveals how the interest tax shield relates to the value of a firm.
C) supports the argument that business risk is determined by the capital structure employed by a firm.
D) supports the argument that the cost of equity decreases as the debt-equity ratio increases.
E) reaches the final conclusion that the capital structure decision is irrelevant to the value of a firm.

Question

Quizplus · Accepted Answer

The Answer of MM Proposition II with taxes:
A) has the same general implications as MM Proposition II without taxes.
B) reveals how the interest tax shield relates to the value of a firm.
C) supports the argument that business risk is determined by the capital structure employed by a firm.
D) supports the argument that the cost of equity decreases as the debt-equity ratio increases.
E) reaches the final conclusion that the capital structure decision is irrelevant to the value of a firm.

MM Proposition II with Taxes