Question: The difference between the M&M theory Case I (no taxes no bankruptcy costs) and M&M Case II (taxes no bankruptcy costs) is The relationship between

The difference between the M&M theory Case I (no taxes no bankruptcy costs) and M&M Case II (taxes no bankruptcy costs) is

The relationship between cost of equity and leverage linear in Case I and non-linear in Case II

Debt is more important according to Case I

Case I does not consider the advantages of debt but Case II only considers the advantages of debt

Case I has an optimal capital structure while Case II does not

Cost of equity increases with cost of equity in Case I only

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