According to Modigliani and Miller Proposition II, the rate of return required by debtholders linearly increases as the firm's debt-equity ratio increases.

Name: According to Modigliani and Miller Proposition II, the rate of return required by debtholders linearly increases as the firm's debt-equity ratio increases.
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According to Modigliani and Miller Proposition II, the cost of equity increases linearly as the firm's debt-equity ratio increases, not the rate of return required by debtholders.

According to Modigliani and Miller Proposition II, the Rate of Return