According to Modigliani and Miller (MM),in a world with corporate income taxes the optimal capital structure calls for approximately 100% debt financing.

Question

Quizplus · Accepted Answer

According to Modigliani and Miller's proposition with taxes, the value of a leveraged firm is higher than the value of an unleveraged firm due to the tax shield provided by debt financing. This implies that, theoretically, in a world with corporate income taxes, the optimal capital structure would maximize debt financing to take full advantage of the tax benefits, leading to the conclusion of approximately 100% debt financing being optimal.

According to Modigliani and Miller (MM),in a World with Corporate