According to the original approach of Modigliani and Miller (M&M),a firm's value is:

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According to the original approach of Modigliani and Miller, a firm's value is unaffected by its capital structure. This means that the firm's overall value and cost of capital are independent of the mix of debt and equity financing used to finance its investments. This theory assumes perfect capital markets without any taxes, transaction costs or other market imperfections. However, in real-world situations, these assumptions may not hold, and a firm's capital structure decisions may have an impact on its value.

According to the Original Approach of Modigliani and Miller (M&M),a