Certain conditions capital structure

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During class I showed you that under certain conditions capital structure, the mix of debt and equity the firm uses, is irrelevant - that is it does not affect firm value (Miller and Modigliani, 1958). However, we observe significant market reactions to transactions that impact capital structure, suggesting that capital structure does impact firm value. Under what conditions or assumptions is capital structure irrelevant to firm value? How might capital structure impact firm value? What types of transactions are likely to be greeted positively and negatively be the market?

Reference no: EM131487166

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