Which of the following is true of the assumptions outlined by the capital structure theory published by Professors Franco Modigliani and Merton Miller (MM)?
A) Personal income taxes are deductible.
B) Brokerage costs do not exist.
C) The value of the firm will be maximized by financing completely through equity.
D) A high debt/assets ratio decreases the value of the firm.
E) Bankruptcy costs are high when the firm uses no debt.

Question

Quizplus · Accepted Answer

The Modigliani-Miller theorem assumes no transaction costs, including brokerage costs, in their initial propositions.

Which of the Following Is True of the Assumptions Outlined