19. Modigliani and Miller published impressive and influential research articles on the theory of Capital...
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19. Modigliani and Miller published impressive and influential research articles on the theory of Capital Structure. All corporations have equity, but not all corporations have debt in their capital structure. In the original M&M research, they made assumptions that led to a result that the proportions of debt and equity did not matter and did not affect the value of the firm. However, in real life, those underlying assumptions do not hold, and the result is that the proportions of debt and equity do matter and do affect the value of the firm. When adding debt or more debt to the capital structure is beneficial to a company, it is because of the effect caused by 20. Following Question 19: When adding debt or more debt to the capital structure is detrimental to a company, it is because of the increased potential for
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