In a World with No Taxes,Modigliani and Miller (MM)show That

question 49

True/False

In a world with no taxes,Modigliani and Miller (MM)show that a firm's capital structure does not affect its value.However,when taxes are considered,MM show a positive relationship between debt and value,i.e. ,the firm's value rises as it uses more and more debt,other things held constant.

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Definitions:

Share Income

Share Income describes the earnings attributed to shareholders from their investment in shares, typically expressed through dividends.

Partnership Terminated

The dissolution of a business partnership through the exit of one or more partners or by mutual agreement.

Agreement

A mutual arrangement, contract, or understanding between parties outlining their rights and responsibilities.

Death

The cessation of all biological functions that sustain a living organism; not relevant in a financial context.