Under Modigiliani and Miller's dividend irrelevance theory,the company's degree of financial leverage will be affected by:
A)The company's share price
B)The company's weighted average cost of capital
C)The value of the company's debt
D)None of the above

Question

Quizplus · Accepted Answer

Modigiliani and Miller's dividend irrelevance theory states that the company's degree of financial leverage is not affected by its dividend policy or the distribution of earnings as dividends or retained earnings. Therefore, none of the options listed (share price, weighted average cost of capital, and value of debt) affect the company's degree of financial leverage according to this theory.

Under Modigiliani and Miller's Dividend Irrelevance Theory,the Company's Degree of Financial