Question

Under the modigliani-miller theorem in finance, thr value of a company depends on: Select One: a....

Under the modigliani-miller theorem in finance, thr value of a company depends on:

Select One:
a. the competitive situation of the company and the projects that the company undertakes and plans.
b. how managers work together.
c. the capital structure of the company.
d. the relative mix of stock returns and dividends.
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer: (a)  the competitive situation of the company and the projects that the company undertakes and plans

The Modigliani-Miller theorem states that the market value of a company is correctly calculated as the present value of its future earnings and its underlying assets, and is independent of its capital structure. The theory stated that the value of the firm is not dependent on the choice of capital structure or financing decisions of the firm.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
According to the Modigliani-Miller theorem, which of the following would have to be true in order...
According to the Modigliani-Miller theorem, which of the following would have to be true in order for capital structure to have no impact upon firm value? I. Taxes have an impact upon the firm's earnings II. The risk of defaulting on debt is nonexistent III. There are no transaction costs of moving from one capital structure to another Select one: A. I only B. I and II only C. I and III only D. II and III only E. I,...
Erin and Mia are finance researchers and are discussing the Modigliani and Miller (MM) divident irrelevance...
Erin and Mia are finance researchers and are discussing the Modigliani and Miller (MM) divident irrelevance theory. Based on your understanding of MM's arguement and the impact fo the assumptions applied to the arguement, fill in the missing parts of their conversation. Erin: Modigliani and Miller (MM) divident irrelevance theory is based on several assumptions, however, in the real world these assumptions do not apply. Mia: Issuance or flotation costs impact divident policy decisions, and companies do not care about...
Under Modigliani and Miller world, as the CEO of company, when you decided to distribute 1...
Under Modigliani and Miller world, as the CEO of company, when you decided to distribute 1 Billion dollar cash, one of your shareholders, Mr. A, who purchased the stock on the ex-date, raised a concern that he will not be getting any dividend and he will be adversely affected by the distribution of the cash. On the other hand, another shareholder, Mr. B, who was holding the stock before the ex-date argued that the earnings per share decreased and he...
How can an unlevered firm obtain financial leverage? Select one: O a. By issuing common stock...
How can an unlevered firm obtain financial leverage? Select one: O a. By issuing common stock O b. By issuing debt O c. By retaining its earnings in the firm O d. By investing in positive NPV investments x O e. By investing in negative NPV projects Which best defines the term "perfect markets"? Select one: O a. Markets that operate under highly restrictive assumptions such as zero taxes O b. Markets that offer the highest returns for a given...
QUESTION 8 A company will issue new common stock to finance an expansion. The existing common...
QUESTION 8 A company will issue new common stock to finance an expansion. The existing common stock just paid a $1.25 dividend, and dividends are expected to grow at a constant rate 9% indefinitely. The stock sells for $45, and flotation expenses of 6% of the selling price will be incurred on new shares. The beta of this company is 1.34. What is the cost of new common stock for this company? 10.16% 11.19% 9.13% 12.22% 8.10% QUESTION 10 You...
Multiple choice questions: (only one answer correct) 1. The company has the greatest chance to raise...
Multiple choice questions: (only one answer correct) 1. The company has the greatest chance to raise bigger amount of equity and place all the shares from the new issue if they choose: Private placement Best effort cash offer Firm commitment cash offer 2. A sinking fund is typically used: To rescue a company from bankruptcy To finance mergers and acquisitions To retire debt securities issued by the company 3. An analyst using Adjusted Present Value should discount proper cash flows...
The Longenes Company uses a target capital structure when calculating the cost of capital. The target...
The Longenes Company uses a target capital structure when calculating the cost of capital. The target structure and current component costs based on market conditions follow. Component Component Mix Cost* Debt 25% 8% Preferred Stock 10 12 Common Equity 65 20 The costs of debt and preferred stock are already adjusted for taxes and/or flotation costs. The cost of equity is unadjusted. The firm expects to earn $20 million next year and plans to invest $18 million in new capital...
Nealon Energy Corporation engages in the​ acquisition, exploration,​ development, and production of natural gas and oil...
Nealon Energy Corporation engages in the​ acquisition, exploration,​ development, and production of natural gas and oil in the continental United States. The company has grown rapidly over the last 5 years as it has expanded into horizontal drilling techniques for the development of the massive deposits of both gas and oil in shale formations. The​ company's operations in the Haynesville shale​ (located in northwest​ Louisiana) have been so significant that it needs to construct a natural gas gathering and processing...
Baldwin Corporation is a public corporation listed on New York Stock Exchange (NYSE) market. The company...
Baldwin Corporation is a public corporation listed on New York Stock Exchange (NYSE) market. The company researches, develops, manufactures, and sells various products in the health care industry worldwide. Baldwin Inc. operates in three main segments: Consumer, Pharmaceutical, and Medical Devices segments. The primary corporate objective of the company is to maximize the value of the owners’ equity by increasing the price of its shares in the stock market. Unfortunately, the company’s stock price has been declining over the past...
Exotic Food Inc., Capital Budgeting Case CASE SUMMARY Exotic Food Inc., a food processing company located...
Exotic Food Inc., Capital Budgeting Case CASE SUMMARY Exotic Food Inc., a food processing company located in Herndon, VA, is considering adding a new division to produce fresh ginger juice. Following the ongoing TV buzz about significant health benefits derived from ginger consumption, the managers believe this drink will be a hit. However, the CEO questions the profitability of the venture given the high costs involved. To address his concerns, you have been asked to evaluate the project using three...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT