Question

arbitrage argument of mm and it's formlula​

Answer 1

Answer:

The MM arbitrage argument states that the market value of the unleveraged company, S U (the price of the U‐share), must be equal to the value of the leveraged company, which is the market value of equity ( S L , the price of the L‐share) plus the value of the debt, D: V U = S U = S L + D = V L .