MM Proposition I,without taxes,assumes that
A)debt is riskless.
B)individuals and corporations can borrow at the same rate.
C)firms can borrow at the risk-free rate.
D)individuals and firms are taxed at the same rate thereby making taxes irrelevant.
E)all firms will prefer an unlevered capital structure.

Question

Quizplus · Accepted Answer

MM Proposition I, without taxes, assumes that individuals and corporations can borrow at the same rate. This means that the cost of debt is the same for both individuals and corporations, and therefore the capital structure of a firm does not affect its overall value.

MM Proposition I,without Taxes,assumes That