Finance Assignment | Professional Writing
May 26th, 2020
Q1) Under the M&M world with corporate taxes, the value of a firm is maximized when the firm is financed with 100% debt.
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True
False
Q2) Under the M&M world with perfect capital markets, the cost of equity is independent of its capital structure.
True
False
Q3) Under the M&M world with perfect capital markets, a firm’s value should rise with increased leverage because debt is cheaper than equity.
True
False
Q4) Under the M&M world with perfect capital markets, a firm’s average cost of capital (i.e. pre-tax WACC) falls for increases in debt as long as the firm avoids truly excessive leverage.
True
False
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