ExamCompetition Your Success, Our Mission
Login Register
Question discussion

Which of the following is not an assumption in Miller and Modigliani approach?

292044Medium 1 reply 821 views
37
Which of the following is not an assumption in Miller and Modigliani approach?
  • AThere are no corporate or personal income tax
  • BInvestors are assumed to be rational and behave accordingly
  • CThere is no corporate tax though there are personal income tax
  • DCapital markets are perfect
Correct answer: D
Join the discussion Report an error

Discussion 1

0
CCommunity
Capital markets are perfect

Capital markets are perfect is not an assumption in Miller and Modigliani approach. The Modigliani-Miller theorem (M&M) states that the market value of a company is calculated using its earning power and the risk of its underlying assets and is independent of the way it finances investments or distributes dividends.