Miller and Modigliani had incorporated the costs of bankruptcy into their model, it is unlikely that they would have concluded that 100% debt financing is optimal.

Question

Quizplus · Accepted Answer

When incorporating the costs of bankruptcy, Miller and Modigliani would have recognized that there are certain costs associated with having too much debt, such as higher interest rates and the risk of defaulting on loans. Therefore, they would have likely revised their conclusion that 100% debt financing is optimal.

Miller and Modigliani Had Incorporated the Costs of Bankruptcy into Their