The M&M proof of capital structure irrelevance relies on:
A)arbitrage arguments
B)personal and corporate leverage are perfect substitutes
C)both of the above
D)neither of the above

Question

Quizplus · Accepted Answer

The M&M proof of capital structure irrelevance relies on both arbitrage arguments and the assumption that personal and corporate leverage are perfect substitutes. This means that the choice of how a company finances its projects through either debt or equity does not affect the value of the firm.

The M&M Proof of Capital Structure Irrelevance Relies On