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Which of the following is/are not true regarding capital structure theory as stated by Mil

Which of the following is/are not true regarding capital structure theory as stated by Miller & Modigliani?


I. If the given assumptions hold, the total market value of the firm is independent of the degree of leverage
II. In the presence of taxes, the market value of the firm is increased by the tax shield of debt
III. If bankruptcy costs are considered, the expected cost of bankruptcy decreases when the debtequity ratio increases


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

Dec 31 2017 View more View Less

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