Modigliani-Miller (no taxes) propositions imply:
ACapital structure matters greatly
BCapital structure is irrelevant to firm value in a perfect marketCORRECT
CEquity is always better
DDebt is always better
CFACorporate Finance
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Why the answer is B, and why the others tempt you.
MM Proposition I (no taxes): firm value depends only on operating cash flows, not capital structure.
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