The Modigliani-Miller Proposition I without taxes states:
A) a firm cannot change the total value of its outstanding securities by changing its capital structure proportions.
B) when new projects are added to the firm the firm value is the sum of the old value plus the new.
C) managers can make correct corporate decisions that will satisfy all shareholders if they select projects that maximize value.
D) the determination of value must consider the timing and risk of the cash flows.
E) None of these.

Question

Quizplus · Accepted Answer

The Modigliani-Miller Proposition I (MM1) without taxes states that the total value of a firm's outstanding securities is independent of its capital structure proportions. This means that changing the mix of debt and equity financing does not result in a change in the overall value of the firm. Therefore, choice A is the correct answer.

The Modigliani-Miller Proposition I Without Taxes States