Which of the following is a feature of the "perfect world" in M&M's theorem for optimal capital structure?
A) Income taxes
B) The chance of bankruptcy
C) Perfectly efficient markets
D) Asymmetric information sets for all participants

Question

Quizplus · Accepted Answer

M&M's theorem assumes a "perfect world" where markets are perfectly efficient, meaning that all relevant information is freely available and prices adjust instantly to reflect new information. This eliminates issues like asymmetric information and considers neither taxes nor bankruptcy, which are real-world complexities.

Which of the Following Is a Feature of the "Perfect