which of the following statements is flase? modigliani and miller's conclusion verified the common view, which stated that even with perfect capital markets, leverage would not affect a firm's value. we cannot evaluate the relationship between risk and return more formally by computing the sensitivity of each security's return to the systematic risk of the economy. investors in levered equity require a higher expected return to compensate for its increased risk. leverage increases the risk of equity even when there is no risk that the firm will default.
