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According to Modigliani and Miller, altering a firm's capital structure will not change a firm's ...

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According to Modigliani and Miller, altering a firm's capital structure will not change a firm's ...

According to Modigliani and Miller, altering a firm's capital structure will not change a firm's value because

▸ taxes have no effect on capital structure decisions.

▸ the value of a firm is based on the earnings power of its assets.

▸ markets are not efficient and shareholders can be fooled by capital structure changes.

▸ bankruptcy costs rise when debt levels increase.

▸ the cost of equity falls as more debt is issued.

Textbook

Corporate Finance Online

Edition: 2^nd

Authors: Eakins, McNally

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Turki

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More solutions for this book are available here

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