Which of the following is NOT one of Modigliani and Miller's set of conditions referred to as perfect capital markets?
A. All investors hold the efficient portfolio of assets.
B. There are no taxes, transaction costs, or issuance costs associated with security trading.
C. A firm's financing decisions do not change the cash flows generated by its investments, nor do they reveal new information about them.
D. Investors and firms can trade the same set of securities at competitive market prices equal to the present value of their future cash flows.

All expectations on expected cash flows are homogenous
bonds and shares are traded in perfect markets - there are no transaction costs. two investments with identical cash flows, terms and risk must trade at the same price
investors can borrow and lend at the risk free rate
there are no agency cost
investing and financing decisions are independent of each other

anthougo anthougo · Answer 2 · 2021-12-23T13:45:45+01:00

The option, NOT one of Modigliani and Miller's set of conditions often referred to as perfect capital markets, is A. All investors hold the efficient portfolio of assets.

Modigliani and Miller's theory is based on the assumptions that there are no taxes, transaction, issuance, and bankruptcy costs in security trading. It relies on the symmetry of market information and the same borrowing cost for investors and companies. These assumptions do not apply in the real world.

Thus, the wrong option is A. All investors hold the efficient portfolio of assets.

Learn more about Modigliani and Miller's set of conditions here: https://brainly.com/question/15580530