The proposition that the value of a levered ﬁrm is equal to the value of an unlevered ﬁrm is known as:
A)MM Proposition I with no tax.
B)MM Proposition II with no tax.
C)MM Proposition I with tax.
D)MM Proposition II with tax.
E)static theory proposition.

Question

Quizplus · Accepted Answer

MM Proposition I with no tax states that the value of a levered firm is equal to the value of an unlevered firm in a world without taxes, bankruptcy costs, and asymmetric information.

The Proposition That the Value of a Levered ﬁRm Is