Question: a) Under M&M Proposition 1, which company would be more valuable and why? (3 pts) b) Under M&M Proposition 2 which company would be more

a) Under M&M Proposition 1, which company would be more valuable and why? (3 pts) b) Under M&M Proposition 2 which company would be more valuable and why (3 pts) (6 Points) % Debt Cost Debt % Equity Cost Equity % Prefs Cost Prefs Tax rate on Debt = 30% Company A 30% 7% 50% 12% 20% 9% Company B 0% 7% 60% 11% 40% 9%

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