What do modigliani and miller assert about the relationship between leverage and firm value in the presence of corporate taxes?

Modigliani and Miller assert that the value of the firm increases with leverage as the relationship between leverage and firm value in the presence of corporate taxes. This is further explained below.

What is leverage?

Generally, In order to carry out an investment or a project, one might make use of leverage by borrowing money, also known as debt. The effect of this is to make the prospective rewards from a project more valuable. In the event that the investment does not provide the desired results, the potential negative risk will be multiplied due to the use of leverage.

In conclusion, According to Modigliani and Miller's research, the connection between leverage and firm value in the presence of corporate taxes is such that an increase in leverage results in a rise in the business's worth.