The Modigliani and Miller hypothesis suggests that capital structure doesn't matter.All of the following conditions need to be met for this hypothesis to be true except:

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The Modigliani and Miller hypothesis suggests that capital structure does not matter if corporate income is not subject to taxation, securities are traded in perfect or efficient markets, and capital structure consists only of stocks and bonds. However, the hypothesis does not assume that all corporate net income is paid out as dividends.

The Modigliani and Miller Hypothesis Suggests That Capital Structure Doesn't