Use the following statements to answer this question:
A) I and II are correct.
B) I and II are incorrect.
C) I is correct and II is incorrect.
D) I is incorrect and II is correct.
I.In a perfect M&M world with corporate taxes,WACC decreases linearly with the increase in debt in the company.
LII.In a perfect M&M world with corporate taxes,the slope of the WACC is proportional to debt.

Question

Quizplus · Accepted Answer

In a perfect M&M world with corporate taxes, the WACC decreases linearly with the increase in debt due to the tax shield on interest, making both statements I and II correct.

Use the Following Statements to Answer This Question