Multiple Choice 1 point
Which of the following statements is FALSE
In a perfect capital market, the total value of a firm is equal to the market value of the total cash flows generated by its assets and is not affected by its choice of capital structure
In the absence of taxes or other transaction costs, the total value of a firm only depends on future cash flows but not on the capital structure
The MM theory proposition one implies that capital structure will affect the total value of the firm under perfect capital market conditions
With perfect capital markets, leverage changes the allocation of cash flows between debt and equity, without altering the total cash flows of the firm
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