| Modigliani-Miller
Theorem |
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A
financial theory that the market value of a firm is independent of
the way it chooses to finance its investment or distribute dividends.
To expand, a firm can choose between three methods of financing: issuing
shares, borrowing, and spending profits (as opposed to dispersing
them to shareholders in dividends).
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It
gets much more complicated, but the basic idea behind the theorem
is in the absence of corporate taxes (an important exception), it
makes no difference how you finance a firm. |
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