FMF9

Syllabus E4. Capital structure theories 8 / 8

a) Describe the traditional view of capital structure and its assumptions.
b) Describe the views of Miller and Modigliani on capital structure, both without and with corporate taxation, and their assumptions.
c) Identify a range of capital market imperfections and describe their impact on the views of Miller and Modigliani on capital structure.
d) Explain the relevance of pecking order theory to the selection of sources of finance.
Capital structure theories