M&M Proposition I with no tax supports the argument that:
A) business risk has no effect on the return on assets.
B) the cost of equity rises as leverage rises.
C) a company's debt-equity ratio is completely irrelevant.
D) business risk is irrelevant.
E) homemade leverage is irrelevant.

Question

Quizplus · Accepted Answer

M&M Proposition I with no tax states that the value of a firm is unaffected by its capital structure, implying that the debt-equity ratio is irrelevant to the firm's value.

M&M Proposition I with No Tax Supports the Argument That