Which of the following is NOT one of Modigliani and Miller's set of conditions referred to as perfect capital markets?
A)All investors hold the efficient portfolio of assets.
B)There are no taxes,transaction costs,or issuance costs associated with security trading.
C)A firm's financing decisions do not change the cash flows generated by its investments,nor do they reveal new information about them.
D)Investors and firms can trade the same set of securities at competitive market prices equal to the present value (PV)of their future cash flows.

Question

Quizplus · Accepted Answer

Modigliani and Miller's set of conditions for perfect capital markets includes the absence of taxes, transaction costs, and issuance costs, as well as the ability for investors and firms to trade the same set of securities at competitive market prices equal to the present value of their future cash flows. It also includes the assumption that a firm's financing decisions do not impact the cash flows generated by its investments or reveal new information about them. However, the assumption that all investors hold the efficient portfolio of assets is not necessarily a condition for perfect capital markets.

Which of the Following Is NOT One of Modigliani and Miller's