Economics · Capital Structure Theories
The assumptions of the Modigliani-Miller (MM) hypothesis of capital structure do NOT include which of the following?
- 1The dividend payout ratio is 100% and corporate taxes do not exist initially
- 2All firms can be classified into homogeneous risk classes
- 3Investors have homogeneous expectations regarding returns
- 4Capital markets are highly imperfect and inefficient✓
Correct answer
Capital markets are highly imperfect and inefficient
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