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Assume that you are in a Modigliani and Miller economy (i.e. in an economy without frictions). Your company is currently all equity financed. A consultant
Assume that you are in a Modigliani and Miller economy (i.e. in an economy without frictions). Your company is currently all equity financed. A consultant is advising you to issue debt and repurchase shares. They argue that the change in capital structure will lead to an increase in the earnings per share and therefore the share-price of the company. Do you agree with the consultant? Discuss in detail
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