The central result from the work of Miller and Modigliani (MM)and subsequent researchers,is that it is now possible to precisely identify a firm's optimal capital structure.

Question

Quizplus · Accepted Answer

The statement is false. Miller and Modigliani's work showed that in a perfect market, capital structure does not affect a firm's value and there is no optimal capital structure. Subsequent research has suggested that factors such as taxes, bankruptcy costs, and agency costs may affect a firm's optimal capital structure. However, there is no precise calculation or formula for determining a firm's optimal capital structure due to the complexity of varying factors and uncertainties in the market.

The Central Result from the Work of Miller and Modigliani