true or false: if the MM(modligliani-miller) hypotheisis holds, the risk of equity does not change as we increase the leverage of the firm.
true or false: if the MM(Modigliani-miller) hypothesis holds, the risk of equity does not change as we increase the leverage of the firm.
true or false: according to the modligliani-Miller hypothesis, if a firm does an equity-for-debt swap, but does not change the operations of the firm, the value of the firm's equity will not change.
true or false: according to the Modligliani-Miller hypothesis, if a firm does an equity-for-debt swap, but does not change the operations of the firm, the sum total of the firms debt and equity will not change.
true or false: If the modigliani miller hypothesis holds, the firms cost of capital depends on how close is to the firms optimal leverage.
true or false: according to the Modigliani-Miller, choosing the right structure can increase the value of the firm.
Modigliani and Miller Propositions: True or False and explain your answer; 1. MM's propositions assume perfect financial markets, with no distorting taxes or other imperfections. 2. MM's proposition 2 assumes that increased borrowing does not affect the interest rate on the firm's debt. 3. Borrowing does not increase financial risk and the cost of equity if there is no risk of bankruptcy. 4. Borrowing increases firm value if there is a clientele of investors with a reason to prefer debt.
your friend makes the following argument: if there are no transaction costs, taxes or information asymmetry, as we increase the leverage of the firm, the risk of equity will increase. Consequently, stock holders will require a higher rate of return. the firm's debt will also become riskier and so bondholders will require a higher rate of return. Hence the firm's weighted average cost of capital will increase. is his statement true or false?
true or false: according to the Modigliani- miller hypothesis, the value of the firm is determined by its operations, not by its financial structure
Which of the following statements is false in a Modigliani-Miller world? A. Capital structure does not affect the cost of capital B. Higher leverage increase the cost of equity C. Higher leverage does not affect the WACC D. Higher leverage does not affect the cost of equity Which of the following is not an advantage of having large shareholders? A. Better coordination in monitoring management B. Executives more likely to be dismissed when underperforming C. Less shareholders' interference in the...
In a perfect capital market, leverage will increase the cost of levered equity only if the debt is not risk free True or false
true or false: an investor should not concern herself with firm-specific uncertainty even if she holds only equity of 1 particular firm.