Question

As per MM proposition with taxes , value of unlevered firm is _____ than levered firm ?
1) Lower
2) Same
3) Higher
4) Fluctuating

Answer 1

3) higher

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Answer 2

In this question, we need to fill in the blanks with the appropriate word.

• Option 3 is correct i.e., Higher.
• As per MM's proposition with taxes, the value of an unlevered firm is higher than the levered firm.
• Under the MM method, the value of a levered firm will be higher than the value of an unlevered firm since the tax shield benefit is raising the firm's worth.
• The value of the company with debt exceeds the value of the company with all equity by an amount equal to the tax rate times the debt's worth.
• The M&M Theorem has never been applied under the assumption of completely efficient markets before.
• According to the presumption, businesses functioning in a world with perfectly efficient markets don't have to pay taxes, trading in securities doesn't involve any transaction fees, bankruptcies are possible but don't incur any fees, and information is perfectly symmetrical.

PROJECT CODE #SPJ2

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