1. MM's Leverage-Irrelevance Proposition. True or false? MM's leverage-irrelevance proposi- tion says: (LOI) a. The value of...
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1. MM's Leverage-Irrelevance Proposition. True or false? MM's leverage-irrelevance proposi- tion says: (LOI)
a. The value of the firm does not depend on the fraction of debt versus equity financing.
b. As financial leverage increases, the value of the firm increases by just enough to offset the additional financial risk absorbed by equity.
c. The cost of equity increases with financial leverage only when the risk of financial distress is high.
d. If the firm pays no taxes, the weighted-average cost of capital does not depend on the debt ratio.
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Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780073382302
6th Edition
Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus
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