Describe the two Modigliani and miller propositions, the key assumptions underlying them, and their relevance to capital structure decisions. Use proposition 2 to calculate the return on equity.
11.1 Learning Outcomes: Describe the two Modigliani and miller propositions, the key assumptions underlying them, and their relevance to capital structure decisions. Use proposition 2 to calculate the return on equity. Discuss the benefits and costs of using debt financing and calculate the value of the income tax benefit associated with debt. 11.2 Action Required: […]