Which of the following are the assumptions underlying MM theories of capital structure? 1. Perfect…
The assumptions include a perfect capital market, no taxes, full dividend payout and comparison within an equivalent risk class. Expectations are homogeneous rather than…
Choose your answer
Which of the following are the assumptions underlying MM theories of capital structure?
1. Perfect capital market
2. Heterogeneous expectations
3. Absence of taxes
4. 100% Dividend payout
5. Equivalent Risk Class
Answer and explanation
Correct answer A
The assumptions include a perfect capital market, no taxes, full dividend payout and comparison within an equivalent risk class. Expectations are homogeneous rather than heterogeneous, so statement 2 is excluded.
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Kerala SET (LBS Centre)