The proposition that the value of the ﬁrm is independent of its capital structure is called:
A) The capital asset pricing model.
B) M&M Proposition I without taxes.
C) M&M Proposition II.
D) The law of one price.
E) The eﬃcient markets hypothesis.

Question

Quizplus · Accepted Answer

M&M Proposition I without taxes states that the value of the firm is determined by its earning power and the risk of its underlying assets, regardless of its capital structure.

The Proposition That the Value of the ﬁRm Is Independent