Remove Equity Financing Remove Firm Value Remove Weighted Average Cost of Capital
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Modigliani-Miller Theorem - is it Any Good For Business Valuation?

Equilest

To understand the theorem, it's helpful to consider two firms that are identical in every way except for their capital structure. Firm A has a higher proportion of debt financing, while Firm B has a higher proportion of equity financing. Suppose also the weighted average cost of capital is 10%.