grad-mm-theorem

Installation
SKILL.md

Modigliani-Miller Theorem

Overview

The Modigliani-Miller theorem (1958) establishes that in perfect capital markets, firm value is independent of capital structure. This irrelevance result serves as the benchmark — every real-world reason capital structure matters is a violation of MM's assumptions.

When to Use

  • Evaluating whether a financing decision creates or destroys value
  • Identifying which market imperfections make capital structure relevant
  • Calculating the value of the tax shield from debt
  • Teaching or analyzing the logical foundations of capital structure theory

When NOT to Use

  • As a literal prescription — real markets are never frictionless
  • When the analysis requires explicit bankruptcy cost modeling (use tradeoff theory)
  • For financial institutions where capital structure is regulated
Related skills

More from asgard-ai-platform/skills

Installs
17
GitHub Stars
190
First Seen
Apr 10, 2026