The basic lesson of MM theory is that the value of a firm is dependent upon the:
A) capital structure of the firm.
B) total cash flows of the firm.
C) percentage of a firm to which the bondholders have a claim.
D) tax claim placed on the firm by the government.
E) size of the stockholders claims on the firm.

Question

Quizplus · Accepted Answer

According to MM theory, the value of a firm is determined by its total cash flows, regardless of its capital structure. Therefore, options A, C, D, and E are not correct.

The Basic Lesson of MM Theory Is That the Value