• Profile photo of John Moffat says

      Firstly the example was only an illustration (and as I explained in the lecture, you could not be expected to do any numbers in the exam, just to be able to write what M&M said).

      Secondly, however, it is still possible to obtain a cost of debt borrowing even if you don’t borrow any! (I do not borrow money from the bank, but I know what interest I would be charged if I did borrow :-) )

  1. avatar says

    Mr Miller was a very clever man. He came up with this theory which we are all studying. Then he set up a trust (or whatever its called) where people put in alot of money so he could invest it on their behalf. And it collapsed. makes me wonder why am i even studying when this doesnt sort of make sense in the real world out there. Just saying as i see it. I guess u learn the real deal through experience rather than theory. Guess thats just the way it is. No wonder Albert Einstein hated a prescribed way of learning. Now its just more evident why the richest are school dropouts. Great lectures on f9 on the brighter note. thankyou

      • Profile photo of John Moffat says

        The collapse of his mutual fund was nothing to do with his theories. The theories that he and Modigliani came up with formed the basis of all financial management theory and have had profound affects. The requirement to produce Statements of cash flows is just one indirect result of their work.
        They didn’t receive a Nobel prize for nothing :-)

  2. Profile photo of Gabriel says

    I was watching this as part of my revision for P4, as it has come up in a past P4 question which I’m practicing and I had no clue of capital structures because I did F9 a long time ago but now I’ve refreshed my memory. Thanks.

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