Modigliani-Miller theorem

finance

Learn about this topic in these articles:

In Merton H. Miller
The Modigliani-Miller theorem explains the relationship between a company’s capital asset structure and dividend policy and its market value and cost of capital; the theorem demonstrates that how a manufacturing company funds its activities is less important than the profitability of those activities.
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In Franco Modigliani
They found, in the so-called Modigliani-Miller theorem, that the market value of a company depends primarily on investors’ expectations of what the company will earn in the future; the company’s debt-to-equity ratio is of lesser importance. This dictum gained general acceptance by the 1970s, and the technique Modigliani invented for…
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