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: If the modigliani miller hypothesis holds, the firms cost of capital depends on how close is to the firms optimal leverage.
true or false: under modigliani-miller , the value of the firm is independent of its capital structures, but the weighted average cost of capital still depends on the capital structures.
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: according to the Modigliani- miller hypothesis, the value of the firm is determined by its operations, not by its financial structure
According to the Modigliani-Miller capital structure theory with taxes but no bankruptcy, the optimal level of debt is 0% 50% 100% Any level of debt is equally good
8. More on capital structure theory The Modigliani and Miller theories are based on several unrealistic assumptions about debt financing. In reality, there are costs, taxes, and other factors associated with debt financing. These costs or effects have led to several theories that explain the impact of these factors on the capital structure of a firm. Based on your understanding of the trade-off theory, what kind of firms are likely to use more leverage? Firms with a higher proportion of...
true or false: according to the Modigliani-Miller, choosing the right structure can increase the value of the firm.
2. Which of the following statement is true regarding the Modigliani and Miller (M&M) propositions (1958) in a perfect financial market? A) Capital structure is irrelevant because of the assumption that investors and companies have differing tax rates. B) It is assumed that the firm’s future cash flows remain fixed under any circumstances. C) The basic lesson of M&M propositions is that company’s capital budgeting decisions are dependent upon the company's capital structure decision. D) The debt-to-equity ratio is an...
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...
How does the cost of capital of the firm depends on the firm’s leverage ratio?
How does the cost of capital of the firm depends on the firm’s leverage ratio? If the cost of capital of equity goes up and the cost of capital of debt goes up, and the firm consists only of debt and equity, does the capital of the firm goes up?