Which of the following is the best definition of M&M Proposition I?
A) The tax saving attained by a firm from interest expense.
B) Termination of the firm as a going concern.
C) The value of the firm is independent of its capital structure.
D) A firm's cost of equity capital is a positive linear function of its capital structure.
E) Financial restructuring of a failing firm to attempt to continue operations as a going concern.

Question

Quizplus · Accepted Answer

M&M Proposition I, formulated by Franco Modigliani and Merton Miller, states that in a perfect market, the value of a firm is independent of its capital structure. This means that the way a firm finances itself, through debt or equity, does not affect its overall value.

Which of the Following Is the Best Definition of M&M