In the absence of taxes and bankruptcy costs,which of the following is true?
A) The total value of the firm is dependent on the firm's capital structure.
B) Investors can undo the leverage that the corporation has undertaken.
C) Adding debt to the capital structure creates value.
D) Shareholders will pay a premium for shares merely because a firm chooses to introduce financial leverage.

Question

Quizplus · Accepted Answer

In the absence of taxes and bankruptcy costs, according to the Modigliani-Miller theorem, the firm's value is unaffected by its capital structure, and investors can adjust their own leverage to offset the firm's leverage decisions.

In the Absence of Taxes and Bankruptcy Costs,which of the Following