Which of the following statements concerning the MM extension with growth is NOT CORRECT?
A) The value of a growing tax shield is greater than the value of a constant tax shield.
B) For a given D/S, the levered cost of equity is greater than the levered cost of equity under MM's original (with tax) assumptions.
C) For a given D/S, the WACC is greater than the WACC under MM's original (with tax) assumptions.
D) The total value of the firm is independent of the amount of debt it uses.
E) The tax shields should be discounted at the unlevered cost of equity.

Question

Quizplus · Accepted Answer

The MM extension with growth suggests that the value of the firm is affected by the amount of debt due to the tax shield benefits, contradicting the statement that the firm's value is independent of its debt level.

Which of the Following Statements Concerning the MM Extension with Growth