MM Proposition II without taxes
MM Proposition II without taxes is the equation rsL =rsU + (rsU – rd)(D/S). Thus, rs increases in a precise way as leverage increases. In fact, this increase is just sufficient to offset the increased use of lower-cost debt.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- MM Proposition II without taxes. rsL =rsU + (rsU – rd)(D/S). Thus, rs increases in a precise way as leverage increases. In fact, this increase is just sufficient to offset the increased use of lower-cost debt.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
