M&M Proposition II with no tax states that a firm's cost of equity is dependent upon the firm's interest tax shield.

M&M Proposition II

Part of the Modigliani-Miller theorem stating that a company's cost of equity increases as its level of debt increases, due to the higher risk of default.

Cost of Equity

The return that investors expect for investing in a company's equity, reflecting the risk of owning equity in the company.

Interest Tax Shield

The tax saving attained by a firm from interest expense.