Conditions under which the proposition hold true are:
No taxes are levied.
Both the cost of insolvency and the trading costs for purchasing and selling shares are zero.
Information flow is symmetrical. As a result, investors will act rationally because they will have access to the same information that a firm would.
Businesses and investors pay the same interest rate on borrowing.
There are no flotation costs such underwriters' commissions, commodities trader payments, advertising costs, etc.
Corporate dividends are not subject to tax.
According to the Modigliani-Miller theorem (M&M), a firm's fair value may be accurately determined as the current value of its anticipated future revenues and its underlying securities, regardless of the structure of the company's capital.
To know more about dividends, visit:
https://brainly.com/question/29510262
#SPJ4
