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1. Explain M&M proposition 1 2. What is Profitability Index and its pros and cons? 3. What...

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Finance

1. Explain M&M proposition 1

2. What is Profitability Index and its pros and cons?

3. What is Payback Period? And its pros and cons?

4. What is NPV? And is it pros and cons?

5. Define financial leverage and explain what an unleveredcompany means.

Answer & Explanation Solved by verified expert
3.9 Ratings (480 Votes)
1 MM proposition 1 assumes perfectly efficient markets and no taxes In this proposition the firms capital structure does not impact the value of the firm In other words the value of the unlevered firm financed only by equity is equal to the value of the levered firm financed by equity and debt The value of a firm is the present value of its future cash flows As there are no taxes    See Answer
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1. Explain M&M proposition 12. What is Profitability Index and its pros and cons?3. What is Payback Period? And its pros and cons?4. What is NPV? And is it pros and cons?5. Define financial leverage and explain what an unleveredcompany means.

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