M&M Proposition I with Taxes States That The

Multiple Choice

M&M Proposition I with taxes states that the:

A) Debt-equity ratio does not affect the total value of a firm.
B) Cost of equity financing increases as the debt-equity ratio rises.
C) Value of a levered firm is equal to the present value of the interest tax shield plus the value of an unlevered firm.
D) Required return on assets is determined by the level of financial risk.
E) Return on equity is dependent upon the marginal tax rate and the debt-equity ratio.