Mathematical Analysis of the Miller-Modigliani Theory
Operations Research Letters, Vol. 1, Issue 4, pp. 148-152, September 1982
5 Pages Posted: 22 Jan 2008 Last revised: 6 May 2017
This paper provides a rigorous mathematical treatment of the problem of valuation of a firm in a deterministic, partial equilibrium framework. It is shown that the dividend and arbitrage approaches to valuation are not equivalent in general. A necessary and sufficient condition for their equivalence is also obtained.
Keywords: MM Theory, Miller-Modigliani theory, partial equlibrium, dividend approach, cash flow approach, valuation of firm. arbitrage pricing, share repurchase, MM theory, financial valuation, infinite horizon firm
JEL Classification: G32, G12, G12, G31, G35, G3, D40, D46, G1
Suggested Citation: Suggested Citation