MM Proposition I,with Tax,supports the Theory That

Multiple Choice

MM Proposition I,with tax,supports the theory that

A) the value of an unlevered firm is equal to the value of a levered firm plus the interest tax shield.
B) the value of a firm is inversely related to the amount of leverage used by the firm.
C) there is a positive linear relationship between the debt-to-equity ratio and firm value.
D) a firm's cost of capital is the same regardless of the mix of debt and equity used by the firm.
E) a firm's weighted average cost of capital increases as the debt-equity ratio of the firm increases.