The modigliani miller model predicts shareholder

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In a world without taxes or transactions costs the Modigliani-Miller model predicts shareholder; wealth invariant to changes in capital structure, whereas the OPM predicts increased shareholder wealth with increased leverage.

Given what you know about option pricing, is a 20% increase in the variance of return on the firms assets more likely to benefit shareholders in a low-leverage or in a high-leverage firm?

Reference no: EM131247346

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