Which of the following statements is false regarding MM's proposition I?
A) Firm value is unaffected by its capital structure.
B) It is also called the debt irrelevance proposition.
C) Shareholders should care about the firm's debt policy.
D) After restructuring, the firm's value should be the same as it was prior to restructuring.

Question

Quizplus · Accepted Answer

MM's proposition I states that firm value is unaffected by its capital structure, also known as the debt irrelevance proposition. However, shareholders should still care about the firm's debt policy as it may affect their personal financial positions. Therefore, statement C is false. Statements A, B, and D are all true regarding MM's proposition I.

Which of the Following Statements Is False Regarding MM's Proposition