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Modigliani and Miller's Irrelevance Hypothesis regarding corporate capital structure assumed: (1) no taxes (2) no costs of financial distress (3) investors can borrow and lend
Modigliani and Miller's Irrelevance Hypothesis regarding corporate capital structure assumed: (1) no taxes (2) no costs of financial distress (3) investors can borrow and lend at the same rates as firms (4) no transactions costs, Under these assumptions, which of the following is true? A. As more debt is added to the firm's capital structure: firm value increase. WACC decreases, the required rate of return on equity increases. B. As more debt is added to the firm's capital structure: firm value does not vary, WACC does not vary, the required rate of return on equity increases. C. As more debt is added to the firm's capital structure: firm value does not vary, WACC does not vary, the required rate of return on equity does not vary. D. As more debt is added to the firm's capital structure, firm value increases, WACC increases, the required rate of return on equity increases
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