MM showed that in a world without taxes, a firm's value is not affected by its capital structure.

Question

Quizplus · Accepted Answer

According to Modigliani and Miller's proposition, in a world without taxes, the value of a firm is independent of its capital structure. This is known as the "irrelevance proposition." Therefore, changes in capital structure (such as issuing debt or equity) in a tax-free world will not impact the overall value of the firm.

MM Showed That in a World Without Taxes, a Firm's