In a world without taxes, M&M Proposition I contends that:

Multiple Choice

• A firm's cost of equity varies with its cost of debt.

• A firm's WACC also determines its cost of equity.

• The cost of capital is a linear function with a positive slope.

• The total value of the firm remains constant regardless of the debt-equity mixture applied.

• The cost of equity is dependent upon the debt-ratio of the firm.