MCQOPTIONS
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| 1. |
Two firms that are virtually identical except for their capital structure are selling in the market at different values. According to M&M |
| A. | one will be at greater risk of bankruptcy. |
| B. | the firm with greater financial leverage will have the higher value. |
| C. | this proves that markets cannot be efficient. |
| D. | this will not continue because arbitrage will eventually cause the firms to sell at the same value. |
| Answer» E. | |