According to Modigliani and Miller,in the absence of taxes,the presence of ________ cannot change the value of the firm.

Question

Quizplus · Accepted Answer

According to Modigliani and Miller's theorem, in the absence of taxes, the presence of debt cannot change the value of the firm. The theoretical reasoning behind this is that the cost of equity is higher than the cost of debt, and the increase in debt is offset by a decrease in equity, resulting in no net change in the value of the firm. Therefore, the correct answer is D - debt.

According to Modigliani and Miller,in the Absence of Taxes,the Presence