The proposition that the value of a levered firm is equal to the value of an unlevered firm is known as:
A)static theory proposition.
B)MM Proposition I with no tax.
C)MM Proposition II with no tax.
D)MM Proposition I with tax.
E)MM Proposition II with tax.

Question

Quizplus · Accepted Answer

This is known as MM Proposition I with no tax. According to this proposition, in the absence of taxes, the value of a levered firm is equal to the value of an unlevered firm.

The Proposition That the Value of a Levered Firm Is