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Which of the following is/are false regarding capital structure theory as stated by Miller

Which of the following is/are false regarding capital structure theory as stated by Miller & Modigliani?


I. If agency costs are considered, the expected agency costs increases as the debt-equity ratio decreases.
II. With the given assumptions, there is no optimal capital structure.
III. In the presence of taxes, the market value of the firm decreases by the tax shield of debt.


[A]Only (I) above
[B]Only (II) above
[C]Both (I) and (II) above
[D]Both (I) and (III) above

Dec 28 2017 View more View Less

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