Modigliani and Miller (MM),in Their Second Article,took Account of Taxes,bankruptcy,and

question 21

True/False

Modigliani and Miller (MM),in their second article,took account of taxes,bankruptcy,and other factors that were assumed away in their original article.Once they took account of all these assumptions,they concluded that every firm has a unique optimal capital structure.Moreover,a manager can use the second MM model to determine his or her firm's optimal debt ratio.

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Definitions:

George Bush

Refers to either the 41st President of the United States, George H. W. Bush (1989-1993), or his son, the 43rd President, George W. Bush (2001-2009).

Recession

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in real GDP, income, employment, manufacturing, and retail sales.

Excess Reserves

The amount of reserves that a bank holds beyond the minimum required by regulation or central bank policy.

Decrease Deposits

A reduction in the amount of funds deposited in banks or financial institutions, often indicating a shift in savings or investment strategies.