5. The MM theory (pie) theory asserts (in the no-taxes case) that holding the assets and investments of the firm fixed, changing the capital structure of the firm has no impact on the value of the firm. a. (5 points) However, we observe that a company borrows additional funds and builds a new plant and expands production, their stock price rising as a result. Does this disprove the MM theory? (Briefly explain) b. (5 points) Next, we observe that a company borrows a large amount of new money (say, $100 million) by selling bonds and they pay the proceeds of the bond issue out to shareholders by repurchasing $100 million worth of shares. The value of the outstanding shares declines, obviously. Does this disprove the MM theory? (Briefly explain) 5. The MM theory (pie) theory asserts (in the no-taxes case) that holding the assets and investments of the firm fixed, changing the capital structure of the firm has no impact on the value of the firm. a. (5 points) However, we observe that a company borrows additional funds and builds a new plant and expands production, their stock price rising as a result. Does this disprove the MM theory? (Briefly explain) b. (5 points) Next, we observe that a company borrows a large amount of new money (say, $100 million) by selling bonds and they pay the proceeds of the bond issue out to shareholders by repurchasing $100 million worth of shares. The value of the outstanding shares declines, obviously. Does this disprove the MM theory? (Briefly explain)