Question

According to Modigliani and Miller (MM), in a world with corporate income taxes, the optimal capital structure calls for approximately 100% debt financing.a. Trueb. False

Answer 1

True

Step-by-step explanation:

The Modigliani Miller approach basically aims at the valuation of company, in which with each component of debt present with corporate taxes involved, the cost of business is reduced and that the value is increased.

As according to that when the taxes are present, the the debt component will only increase the return and value of the business.

Thus, it provides for increasing worth of business through debt utilization.