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Which term is associated with Modigliani's research on corporation's market value?
Modigliani Risk Adjustment
Modigliani Premium
Modigliani Proposition
Modigliani Balance
Answer
The Modigliani Proposition states that a firm's market value is unaffected by its capital structure, meaning that the mix of debt and equity financing does not impact the firm's overall value. This proposition is based on the assumption that investors are indifferent between debt and equity, and that the firm's cost of capital is constant regardless of its capital structure.
Mastermind of Modern Economics: The Franco Modigliani Quiz
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