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:

Perfection

In law, especially regarding secured transactions, refers to the act of making a security interest enforceable against third parties by fulfilling legal requirements.

Financing Statement

A document filed by a creditor to announce a security interest in a debtor's assets, used in securing loans.

Security Agreement

A legal contract that grants a lender a security interest in a specific asset or property pledged as collateral by the borrower.

UCC

Short for Uniform Commercial Code, a comprehensive set of laws governing commercial transactions in the United States.