The M&M proposition says that if a firm can be thought of as a tub of whole milk that a farmer can separate into cream and skim milk and there are no costs of separation or government
Support programs, then

Question

Quizplus · Accepted Answer

The M&M proposition focuses on the principle of value additivity, which states that the value of the whole is the sum of the values of its parts. In this case, the tub of whole milk represents the whole, while the cream and skim milk represent its parts. Since there are no costs of separation or government support programs, the value of the whole milk should equal the value of the cream plus the value of the skim milk, hence option A is the correct choice. The M&M proposition states that the total value of the firm is independent of the way it is financed. In this case, the firm can be thought of as a tub of whole milk that can be separated into cream and skim milk. If there are no costs of separation or government support programs, then the value of the whole milk should equal the value of the cream plus the value of the skim milk. This is because there are no additional costs associated with separating the milk, and the sum of the values of the two components should be equal to the value of the whole. Therefore, choice A is the correct answer.

The M&M Proposition Says That If a Firm Can Be