Modigliani and Miller originally suggested that firm value and the use of debt were independent.

Question

Quizplus · Accepted Answer

Modigliani and Miller's theorem, also known as the capital structure irrelevance principle, states that the value of a firm is determined by its assets and operations and is independent of its capital structure (the ratio of debt to equity). Therefore, firm value and the use of debt are indeed independent according to their original suggestion.

Modigliani and Miller Originally Suggested That Firm Value and the Use