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Modigliani and Miller (M&M) (1958) advanced the idea that, if your objective is to maximise shareholder value,

the debt to equity ratio is irrelevant. However, they did comment that this conclusion only held in a world of no taxes. In a world with tax, MM counter argued that it was better to 'gear-up' a company as high as possible.


Discuss M&M's theoretical arguments in relation to the real-world influences on the gearing level adopted by firms. Does an 'optimum' level of gearing really exist?

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PLEASE NOTE: There is no optimum capital structure that exists in the real world. Therefore, companies... View the full answer

tutor m& m-1.jpg

Discuss M8.lvi's theoretical arguments in relation to the real-world influences on the gearing level
adopted by firm 1. M&M theory (with no tax) .The main idea of this M&M theory is that...

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