What is the Modigliani-Miller theorem?

In a world with no taxes, bankruptcy costs, or information asymmetry, capital structure is irrelevant — firm value is determined by asset cash flows alone. With taxes, debt has value through the interest tax shield.

What is MM Proposition II?

As leverage increases, equity holders demand higher returns because equity becomes riskier. Cost of equity increases linearly with D/E ratio: Ke = Ku + (Ku - Kd) × (D/E), exactly offsetting the benefit from cheap debt.

Modigliani-Miller Capital Structure Calculator

Apply Modigliani-Miller propositions with and without taxes. Calculate levered vs. unlevered firm value, levered vs. unlevered cost of equity, and determine the tax shield benefit of debt financing. Essential for corporate finance theory coursework.

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$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Apply Modigliani-Miller propositions with and without taxes. Calculate levered vs. unlevered firm value, levered vs. unlevered cost of equity, and determine the tax shield benefit of debt financing. Essential for corporate finance theory coursework. Use the modigliani-miller result to inform your calculation.

Modigliani-Miller Capital Structure Calculator

How to Use

Frequently Asked Questions

What is the Modigliani-Miller theorem?

What is MM Proposition II?