Modigliani and Miller Proposition (version 1)

If we assume:

1. There are no taxes
2. The are no contracting costs
3. Fixed real investment policy

Then:

• The market value of the firm is independent of the choice of financing, or, put another way,
• The current choice of financing policy doesn't affect the value of the firm, or, put another way,
• There is no unique capital structure which maximizes firm value.