Charge It Company operates in perfect capital markets and earns a net operating profit of $2 million each and every year. It operates in an industry in which the required return on assets is 8%. The firm has $12,500,000 worth of outstanding bonds that pay 5% interest, and it has $12,500,000 in common stock with a required return of 11%. 

What is the total value of the company according to Proposition One.

Answer rating: 100% (QA)

Proposition One of Modigliani and Millers Capital Structure Theorem in perfect capital markets ... View the full answer