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According to Modigliani and Miller's proposition I, in a world with no taxes and no bankruptcy risk, what is the relationship between the value of a leveraged firm (VL) and an all-equity firm (VE)?
According to Modigliani and Miller's proposition I, in a world with no taxes and no bankruptcy risk, what is the relationship between the value of a leveraged firm (VL) and an all-equity firm (VE)?
- VL is always less than VE
- They are equal (correct)
- VL is always greater than VE
- They are unrelated
What did M&M introduce in their first theory in 1956 regarding capital structure in a world with no taxes and no bankruptcy risk?
What did M&M introduce in their first theory in 1956 regarding capital structure in a world with no taxes and no bankruptcy risk?
- Equity is always preferred over debt
- Debt is always preferred over equity
- Debt-equity mix is irrelevant (correct)
- Capital structure depends on industry type
What does M&M proposition I state about the value of a leveraged firm (VL) compared to an all-equity firm (VE) in the absence of taxes and bankruptcy risk?
What does M&M proposition I state about the value of a leveraged firm (VL) compared to an all-equity firm (VE) in the absence of taxes and bankruptcy risk?
- VL is always greater than VE
- VL is always less than VE
- Value does not depend on capital structure (correct)
- Value depends on industry type
In what way does capital structure influence a firm's weighted average cost of capital?
In what way does capital structure influence a firm's weighted average cost of capital?
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What did M&M propose about a firm's debt-equity mix in a world with no taxes and no bankruptcy risk?
What did M&M propose about a firm's debt-equity mix in a world with no taxes and no bankruptcy risk?
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