Harald Hau's Quotes of the Day from Corporate Finance
Today's quotes are not as voluminous as usual. Perhaps it had to do with the fact that we learned about Modigliani-Miller today, all three parts of the theory in 90 minutes. The pace was pretty brutal as Professor Hau derived some of the model on the overhead and then ran through several examples. I glanced around the amphi a few times during class, and lots of people had blank looks on their faces. Some of them looked pained, and other looked like they were gasping for breath, as if someone had been holding their heads underwater. School is tough.
[this isn't so funny but has a particular elegance that I like] "Now let us examine the intertemporal evolution of leverage in capital structure..."
[on Modigliani's explanation of the his theorem to a journalist who called after the Nobel Prize had been awarded] "Cutting up a pizza makes more slices but not more pizza."
[responding to a student's observation of the M-M model] "This is intuition, but it is wrong intuition."
[discussing the assumptions underlying M-M, of which one is that firms can be costlessly liquidated and their assets redistributed] "Bankruptcy is costly because all the lawyers have to take their share... this is not included in the theory."
Modigliani-Miller's three observations:
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Firm value is leverage-invariant
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Return on equity increases with leverage
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Firm cost of capital ( WACC) is leverage-invariant
9:13:26 PM 
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