Modigliani and Miller (1958) and Miller and Modigliani (1961) provide a new perspective on optimal capital structure and dividend policy. Using arbitrage arguments, they prove that under very restrictive assumptions neither capital structure nor dividend decisions matter. Therefore, such decisions should not have any impact on the market value of a firm. Because financing, capital structure, and dividend decisions do not enhance shareholder value, they are deemed to be irrelevant.
Using finance theory and recent developed model by Fama and French (2016), provide an argument on implications of related factors and market risk sensitivity.
2-3 references are required (from textbooks and academic journals ONLY).
Use a 12-point font, nothing too fancy (this font is Times New Roman), use one and half or double spacing, justify margins, leave a space between and/or indent the start of each new paragraph.
Corporate Finance – Jonathan B. Berk, Peter M. DeMarzo 2014 (electronic resource). Available online.
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