Discuss M & M model of capital structure without taxes.

Question

20 Mar 2023

Answer :

Word Count : 347

The M&M (Modigliani-Miller) model of capital structure without taxes was proposed by Franco Modigliani and Merton Miller in 1958. The model shows that in a perfect capital market, the value of a firm is independent of its capital structure.

According to the M&M model, the cost of capital for a firm is determined by the risk of its assets and not by its financing decisions. Therefore, the cost of equity and the weighted average cost of capital (WACC) of a firm remains constant regardless of its ______ ______ ________ ____ ____ ________ __________ ____ ________ ___ ____.
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