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| Which of the following statements most correctly characterizes MM proposition 2? A. Firms will seek to use debt financing up to the point that the value of the tax shield benefit is outweighed by the costs of financial distress. B. Increasing the use of relatively lower cost debt causes the required return on equity to increase such that the overall cost of capital is unchanged. C. Regardless of how the firm is financed, the overall value of the firm and aggregate value of the claims issued to finance it remain the same. |