Modigliani and Miller Proposition II

Modigliani and Miller Proposition II

A proposition by Modigliani and Miller which states that the cost of equity is a linear function of the firm's debt/equity-ratio.
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From the expression of WACC, as noted in equation (3), one can easily derive Modigliani and Miller Proposition II. From Modigliani and Miller Proposition II, one can derive WACC.