Asked by
D5eel Aljuaid
on Nov 07, 2024
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M&M Proposition II with no tax states that a firm's cost of equity is dependent upon the firm's debt-equity ratio.
M&M Proposition II
Modigliani and Miller's Proposition II states that a company's cost of equity increases as it increases its leverage due to the risk premium on equity.
Debt-Equity Ratio
A financial ratio that measures the relative proportion of shareholders' equity and debt used to finance a company's assets.
- Become familiar with the key propositions of Modigliani and Miller concerning the configuration of capital, tax effects, and the price of capital.
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Learning Objectives
- Become familiar with the key propositions of Modigliani and Miller concerning the configuration of capital, tax effects, and the price of capital.