The argument(s) that the value of a ﬁrm is independent of the ﬁrm's capital structure is presented as:
A) M&M Proposition I with no tax.
B) M&M Proposition I with tax.
C) M&M Proposition II with no tax.
D) M&M Proposition II with tax.
E) Both M&M Proposition I and II with no tax.

Question

Quizplus · Accepted Answer

M&M Proposition I states that the value of a firm is independent of its capital structure in a world with no taxes. Therefore, choice A is the correct answer.

The Argument(s) That the Value of a ﬁRm Is Independent