Modigliani and Miller followed up their initial work with a new model that incorporated a world with corporate taxes. Which of the statements below results from this model?
A) A new Proposition I with taxes and it states: All debt financing is optimal.
B) A new Proposition II with taxes and it states: The WACC of the firm falls as more debt is added.
C) The more debt sold, the greater the tax shield and the smaller the government's share of the firm.
D) All of these
Answer: D
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A) Problem-solving B) Problem-identification C) Problem-manipulation D) Problem-correction E) Problem exception
An advantage of the net present value method is that it considers the time value of money
Indicate whether the statement is true or false
In general, a cost incurred in conjunction with a long-term asset is included in the long-term asset account when the cost
A) is incurred subsequent to asset use. B) exceeds a certain dollar amount. C) is incurred prior to asset use. D) will expire in less than one year.
All of the following are true of the gross profit ratio except:
a. gross profit is a function of the markup percentage. b. the gross profit ratio is calculated by dividing gross margin by net sales. c. a revenue-related fraud scheme that overstates sales will result in an increase in this ratio. d. the gross profit ratio will increase if cost of goods sold is overstated.