The following questions pertain to the Modigliani-Miller (MM) result that risk management is irrelevant. C....
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The following questions pertain to the Modigliani-Miller (MM) result that risk management is irrelevant. C. Discuss assumptions of MM which lead to the result that financial risk management is irrelevant d. A key assumption of MM is that there are no bankruptcy costs. Provide a theoretical rational of why presence of bankruptcy costs can alter the value function of the firm (draw e-diagrams, don't draw with a pencil and insert a picture). What is firm value formula that results when there are bankruptcy costs and corporate taxes in which interest on debt is a tax-deductible expense. The following questions pertain to the Modigliani-Miller (MM) result that risk management is irrelevant. C. Discuss assumptions of MM which lead to the result that financial risk management is irrelevant d. A key assumption of MM is that there are no bankruptcy costs. Provide a theoretical rational of why presence of bankruptcy costs can alter the value function of the firm (draw e-diagrams, don't draw with a pencil and insert a picture). What is firm value formula that results when there are bankruptcy costs and corporate taxes in which interest on debt is a tax-deductible expense
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