The Reason That MM Proposition I Without Taxes Does Not

Multiple Choice

The reason that MM Proposition I without taxes does not hold in the presence of corporate taxation is because:

A) levered firms pay less taxes compared with identical unlevered firms.
B) bondholders require higher rates of return than stockholders do.
C) earnings per share are no longer relevant with taxes.
D) dividends become a tax shield.
E) debt is more expensive than equity.