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An entrepreneur is offered an investment in his company in return for equity. He refuses, and prefers to take a loan, since by taking equity

An entrepreneur is offered an investment in his company in return for equity. He refuses, and prefers to take a loan, since by taking equity he will be losing the upside. Is this aregument valid in a M-M world (proposition 1). If so, please explain. If not, what friction can justify this type of argument?

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