According to the Modigliani and Miller proof,capital structure is irrelevant to firm value because of ____________
A)'Home made' leverage
B)'Asset' leverage
C)'Financial' leverage
D)'Gearing' leverage

Question

Quizplus · Accepted Answer

According to the Modigliani and Miller proof, "home made" leverage (aka personal borrowing by shareholders or dividend policy decisions) can replicate the effects of traditional financial leverage (such as increasing debt) on firm value. Therefore, capital structure is irrelevant to firm value.

According to the Modigliani and Miller Proof,capital Structure Is Irrelevant