Question

45. The proposition that the value of a levered firm is equal to the value of an unlevered firm is known as:
(A). business risk determines the return on assets.
(B). the cost of equity rises as leverage rises.
(C) it is completely irrelevant how a firm arranges its finances.
(D)
firm should borrow money to the point where the tax benefit from debt is equal to the cost of the
increased probability of financial distress.
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Answer 1

Answer:

The proposition that the value of a levered firm is equal to the value of an unlevered firm is known as: MM Proposition I with no tax.