According to Modigliani and Miller (M&M), in a world of perfect capital markets, what will be the

Question:

According to Modigliani and Miller (M&M), in a world of perfect capital markets, what will be the expected equity return (or cost of equity) for a firm that has a cost of capital of 10 percent, a cost of debt of 6 percent, debt valued at $1.2 million, and equity valued at $1.0 million?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...