MM Proposition I without taxes is used to illustrate:
A) the value of an unlevered firm equals that of a levered firm.
B) that one capital structure is as good as another.
C) leverage does not affect the value of the firm.
D) capital structure changes have no effect on stockholders' welfare.
E) All of

Question

Quizplus · Accepted Answer

MM Proposition I without taxes states that the value of a firm is unaffected by its capital structure, implying that leverage does not affect the firm's value, and thus, all capital structures are equally good, and changes in capital structure do not impact stockholders' welfare.

MM Proposition I Without Taxes Is Used to Illustrate