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Visitor number 66405 as of October 4, 2001

An Implication of the Modigliani-Miller Capital Structuring Theorems on the Relation between Equity and Debt

Ruben D. Cohen (e-mail)

Abstract

We illustrate here the effects of the Modigliani-Miller theorems on capital structuring, emphasising especially on the relationship between equity and debt. This is carried out numerically via a simplified financial statement, which takes us through the methodology that leads to the ROE, WACC and firmís value, all plotted against leverage.