Results of the MM analysis

The results of the MM analysis can be summarized as follows :

A. The only benefit of debt financing (relative to equity financing) is the reduction in corporate income taxes due to the tax deductibility of debt interest.

B. There is no disadvantage of debt financing relative to equity financing. Implications for Financing. If a firm is not paying corporate income taxes, the financing decision is irrelevant. It doesn't matter one way or the other whether or not debt is used. A firm paying corporate taxes should maximize its use of debt. Debt is superior to any other financing source.