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: 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 modigliani miller hypothesis holds, the firms cost of capital depends on how close is to the firms optimal leverage.
The Modigliani-Miller theory that the value of the firm is independent of its capital structure is based on a(n) process. Reinvestment Capital asset pricing model Arbitraging Compound interest Question 2 As more debt is added to the capital structure of a firm, the cost of debt capital initially rises slowly, then falls beyond some point increases at a steady rate throughout the entire range becomes greater than the cost of equity beyond a certain point initially rises slowly, then increases...
true or false: according to the Modigliani- miller hypothesis, the value of the firm is determined by its operations, not by its financial structure
true or false: according to the Modigliani-Miller, choosing the right structure can increase the value of the firm.
According to the Modigliani and Miller hypothesis, the value of a firm: (Selct the best choice below.) A. is independent of the firm's capital structure. B. is maximized as the firm uses 99.9% of equity financing in its capital structure. C. decreases as the debt financing in the firm's capital structure increases. D. increases as the debt financing in the firm's capital structure increases.
Modigliani and Miller put forward the idea that the choice of capital structure is irrelevant to the value of the firm Required: Describe the Modigliani and Miller capital structure theories as fully as possible. Include assumptions made and any key propositions made by Modigliani and Miller. (10 marks) Critically evaluate this theory with regard to its relevance to the real world (10 marks) (Total 20 marks)
The Miller Modigliani theorem posits that debt policy is irrelevant, when it comes to firm value. Assume that you have a firm that is funded entirely with equity and has a beta (unlevered) of 0.90, the risk-free rate is 3% and the equity risk premium is 6%. What will happen to the cost of capital, if the firm moves to a 30% debt ratio? a.) none is true b.) the cost of capital will go up c.) the cost of...
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...
The weighted average cost of capital for a firm is dependent upon the firm's level of risk. TRUE OR FALSE It is generally better to base estimates of the WACC on book value weights of debt and equity since market values, particularly those for equity, tend to fluctuate widely. TRUE OR FALSE Ignoring taxes, if a firm issues debt at par, then the YTM cannot be computed. TRUE OR FALSE
The noted Professors of Economics, Modigliani and Miller, theorized that absent taxes or costs related to financial distress: a) The value of a firm is independent of its capital structure. b) The value of a firm can be manipulated by capturing arbitrage opportunities in the markets for the firm's securities. c) The cost of equity capital increases as the percentage of debt in the capital structure increases. Both A and C. Both B and C.