21 a) Miller and Modiglani worked as professors in Carnegie Mellon University at the GSIA (Graduate School of Industrial Administration) in 1960. Their work as corporate finance lecturers led them to the creation of the M & M theorem after discovering that much of the available works were inconsistent. Their work has been fundamental in the field, and forms much of the basis for corporate finance (Brusov et al., 2015).
The embedded assumptions in the M & M theorem are as follows:
The firms must at all times be in an identical business risk class. If the organizations risk degrees differ, different rates will be imposed on the market valuation of the firms. Firm’s earnings will be capitalized at varying capital costs.
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