Question

The basic lesson of M&M theory is that the value of a firm is dependent upon: A. Size of the stockholders' claims. B. The total cash flow of the firm. C. The firm's capital structure. D. The amount of marketed claims to that firm. E. Minimizing the marketed claims.

Answer 1

Answer:

The total cash flow of the firm

Explanation:

The M & M theory is a theory developed by Modgliani Miller about the capital structure of a company and its overall value .

The theory was first enacted under the assumption of a perfectly efficient market and when the effects of taxes and bankruptcy costs were not considered, However , he later developed another theory where tax and other costs are now considered to address the real world condition.

In summary , the basic lesson is that the value of a firm is dependent on the total cash floe of the firm.