The reason that MM Proposition I does not hold in the presence of corporate taxation is because bondholders require higher rates of return than stockholders do earnings per share are no longer relevant with taxes dividends become a tax shield debt is more expensive than equity levered firms pay less taxes compared with identical unlevered firms The reason that MM Proposition I does not hold in the presence of corporate taxation is because bondholders require higher rates of return than stockholders do earnings per share are no longer relevant with taxes dividends become a tax shield debt is more expensive than equity levered firms pay less taxes compared with identical unlevered firms

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Question: The reason that MM Proposition I does not hold in the presence of corporate taxation is because: bondholders require higher rates of return than stockholders

The reason that MM Proposition I does not hold in the presence of corporate taxation is because: bondholders require higher rates of return than stockholders do. earnings per share are no longer relevant with taxes. dividends become a tax shield. debt is more expensive than equity. levered firms pay less taxes compared with identical unlevered firms.

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