Modigliani-Miller Propositions 1 and 2

Modigliani-Miller Propositions 1 (No taxes): Capital Structure Irrelvance
--> Assume that operating earnings are unaffected by financing decisions, the total value of debt and equity will be undaffected by the propositions of debt and equity in a firm's capital structure

Modigliani-Miller Propositions 2 : Cost of Equity and Leverage
-->Stated that the decraese in financing costs from using a lrager proportion of debt is just offset by the increase in the csot of equity, resulting in no change in the firm's WACC-->
MM2 is consisitent with MM1; if the benefits of greater use of lower-cost debt financing are just offset by the increased cost of equity, the propositions of debt versus equity in the firm's captial structrure do not affect the firm's overall cost of capital or the value of the firm