Which one of these argues than the value of a firm is independent of its capital structure?
A)MM Proposition I without taxes
B)MM Proposition II without taxes
C)Capital asset pricing model
D)MM Proposition I with taxes
E)MM Proposition II with taxes

Question

Quizplus · Accepted Answer

MM Proposition I without taxes states that the value of a firm is independent of its capital structure in a perfect market, where there are no taxes, no transaction costs, and no bankruptcy costs. This proposition suggests that the market value of the firm is determined solely by its earnings potential and the risk of its underlying assets, rather than by how the firm chooses to finance its assets.

Which One of These Argues Than the Value of a Firm