Which of the Following Is NOT One of Modigliani and Miller's

question 88

Multiple Choice

Which of the following is NOT one of Modigliani and Miller's conditions for a perfect capital market?

• A)A firm's financing decisions do not change the cash flows generated by its investments, nor do they reveal new information about them.
• B)All investors hold the efficient portfolio of assets.
• C)There are no taxes, transaction costs, or issuance costs associated with security trading.
• D)Investors and firms can trade the same set of securities at competitive market prices equal to the present value (PV)of their future cash flows.

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Definitions:

Equivalent Payment

A payment amount adjusted to reflect an equivalent value under different conditions or terms.

Earn

To receive payment or reward for work performed or for the provision of goods or services.

Economic Values

The monetary, material, or assessed worth of an asset, good, or service, which is determined by the market or by individual or societal preferences.

Annual Rate

Annual rate, often used in the context of loans and investments, refers to the percentage that signifies the yearly cost of funds or the yearly return on investment.