Question

According to Modigliani and Miller capital structure theory: Group of answer choices the cost of equity capital increases as a firm take on more debt financing. the value of a levered firm decreases relative to the value of an unlevered firm as corporate tax rates increase. the value of the firm is independent of capital structure in a world with perfect capital markets and corporate taxes. firms should employ as close to 100% debt financing as possible in a world with perfect capital markets and corporate taxes only. firms should employ 100% equity financing in a world with perfect capital markets and no taxes

Answer 1

the value of the firm is independent of capital structure in a world with perfect capital markets and corporate taxes.

Step-by-step explanation:

The Modigliani-Miller theorem refers to a theory where the capital structure does not have any impact on it. It is totally independent

So as per the given options, third option is correct as the capital structure i.e. combination of the equity and the debt should have no impact under this theory

Therefore the third option is correct