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Modigiani and Miller theory states that, in a perfect market, although both debt and equity become riskier due to an increase in the firms leverage,
Modigiani and Miller theory states that, in a perfect market, although both debt and equity become riskier due to an increase in the firms leverage, both the firms value and risk remain exactly the same. Conceptually, what would it take for the firm to become worth more and/or be safer even when both debt and equity become riskier due to an increase in the firms leverage?
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