Modigliani and Miller Proposition I states that the market value of any firm is independent of its capital structure.

Question

Quizplus · Accepted Answer

Modigliani and Miller Proposition I asserts that a firm's value is not affected by its financing decisions. In other words, a firm's total value is derived from its underlying assets and income-generating capability, which are independent of how those assets are financed. As a result, changing the mix of debt and equity in a firm's capital structure cannot increase its total market value.

Modigliani and Miller Proposition I States That the Market Value