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QUESTION 20 Multiple Correct Answers: Which of the following statements concerning capital structure theory are CORRECT (choose all correct answers; avoid checking incorrect ones)? (MM
QUESTION 20 Multiple Correct Answers: Which of the following statements concerning capital structure theory are CORRECT (choose all correct answers; avoid checking incorrect ones)? (MM = Modigliani and Millier) To maximize ROE and share prices, whenever possible, companies should avoid using debt at all because it requires paying interest. Under MM with corporate taxes, the value of a levered firm exceeds the value of the unlevered firm by the product of the tax rate times the market value dollar amount of debt. (VL vs. V) DOO Personal taxes on debt income decrease the value of using corporate debt, Under MM with zero taxes, financial leverage has no effect on a firm's value. Apple company is likely to use more debt financing than Walmart because Apple's revenues and operating incomes are likely to remain more stable than Walmart's
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