Question
The Nobel Prize winning Modigliani & Miller Theory states that a firms capital structure does not matter.It is based on three key assumptions: No income
The Nobel Prize winning Modigliani & Miller Theory states that a firms capital structure does not matter.It is based on three key assumptions:
- No income taxes
- Equal borrowing cost- individuals can borrow at the same interest rate as corporations.
- Perfect markets: There are no bankruptcy, transaction, contracting, or agency costs.
Are these assumptions reasonable?
What are the implications if the assumptions do not hold?
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Practical Financial Management
Authors: William R. Lasher
8th edition
1305637542, 978-1305887237, 1305887239, 978-1305637542
