Quiz Ch 13 – T/F Modigliani and Miller’s Capital Structure Evolution with Taxes

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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True or false: Modigliani and Miller's second article, considering corporate taxes, concluded that nearly 100% debt maximizes firm value and minimizes the cost of capital. Bankruptcy costs were omitted. Bankruptcy costs lead to an optimal structure with a debt ratio of less than 100%.

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