Which one of these statements is correct?
A)Firms across all industries in the U.S.tend to have similar debt-to-equity ratios.
B)The banking industry tends to have the lowest debt-to-equity ratio of any U.S.industry.
C)Financial leverage lowers risk to equity holders.
D)MM Propositions ignore bankruptcy costs.
E)MM Propositions without taxes illustrate that a firm's overall cost of capital is affected by leverage.

Question

Quizplus · Accepted Answer

MM Propositions, particularly Proposition I without taxes, assume no bankruptcy costs, implying that capital structure does not affect a firm's value.

Which One of These Statements Is Correct