Which of the following are assumptions that they claim must hold for financing decisions to be irrelevant? Group of answer choices There are no taxes There are no transaction costs The firm has a fixed investment policy The sun must rise in the North and set in the South
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
According to Modigliani and Miller's theory, a company's capital structure does not have an effect on the market value of the company under certain ideal circumstances. The main presumption is that there are no tax advantages or disadvantages connected with debt or equity financing in a world without taxes. A further implication of the absence of transaction costs is that businesses can easily change their capital structure without incurring costs.
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