In general terms, M&M Proposition I deals with the firm's ____ while M&M Proposition II deals with the firm's _____.

Question

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M&M Proposition I states that in a world without taxes, bankruptcy costs, and asymmetric information, and in an efficient market, the value of a firm is unaffected by its capital structure. M&M Proposition II extends this by explaining that the cost of equity for a leveraged firm increases in a linear relationship with its capital structure, reflecting the increased risk taken on by equity holders.

In General Terms, M&M Proposition I Deals with the Firm's