Information before all to the 3. Theorem supplement--Clearing man 00:11, 23. May 2006 (CEST)

The Modigliani Miller theorems were presented to corporation finance and the theory OF by Franco Modigliani and Merton Miller 1958 in its essay "“The cost OF capital, investment"”. They treat the influence of the debt ratio of an enterprise on its capital costs.

First theorem

Prevarication of the capital structure for the market value of an enterprise.

• If it
  • no taxes,
  • no insolvency costs,
  • no asymmetrical information and
  • a perfect capital market
• gives, over which an enterprise U is financed, then
  • the market value of the enterprise is U
    • independently of the financing form of the enterprise U thus in particular also
    • independently of the debt ratio of the enterprise And.

Although these conditions in practice never apply, from it the following can be derived: If the capital structure has meaning for an enterprise, then because at least one of the above acceptance does not apply. I.e. if we optimize the capital structure, we must examine the influence of the determinants for the capital structure.

Second theorem

The own capital funds costs as linear function of the debt ratio.

• If
  • the first Modigliani Miller theorem for an enterprise U applies,
  • U an enterprise is, whose liabilities consist only of priority outside capital and subordinate own capital funds,
• then
  1. the own capital funds cost set of the enterprise depends linear on the debt ratio of this enterprise,
  2. the outside capital cost set of the enterprise is independent of the debt ratio of this enterprise,
  3. the total capital cost set of the enterprise is independent of the debt ratio of this enterprise.

This connection can be simply represented by an appropriate capital cost curve. This means contrary to the traditional management economics that there is no optimal debt ratio for an enterprise.

Third theorem

The Konstanz of the average capital costs.

See also

Leverage effect

Articles in category "Modigliani Miller theorem"

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