M&M’s Proposition I states that a company’s value is independent of its capital structure
The cost of debt is generally lower than the cost of equity. Top of Form True False Bottom of Form M&M’s Proposition I states that a company’s value is independent of its capital structure. Top of Form True False Bottom of Form A higher level of leverage generally reduces managerial discretion. Top of Form True False Bottom of Form The Pecking Order Theory of capital structure implies a unique optimum capital structure. Top of Form True False Bottom of Form As EBIT drops, the return on equity (ROE) of a levered firm drops ______ the ROE of an otherwise identical unlevered firm. Top of Form the same as relatively more than relatively less than more or less than (it cannot be determined) Bottom of Form Shareholders prefer high risk projects when facing a high probability of bankruptcy because Top of Form […]
