 The law of one press says that the leverage does not affect the firm's total value, rather it changes the allocation of the cash flows between debt and the equity without altering the firm's total cash flows. In this scenario, the famous Modigliani and Miller has showed and proved this particular theme under a specified set of assumptions, now commonly known as the perfect capital market. So what is perfect capital market, it is a market pair buyer and sellers are for the same set of securities and the trading of these securities is happening at the price that is equal to the present values of future cash flows of these securities, traders are free from taxes and transaction cost or other issuance cost etc. And the firms cash flows from its assets are independent of its choice of capital structures. So these are the assumptions of and characteristics of perfect capital market. In this scenario, the MM proposition one is developed which says that in a perfect capital market, the market value of affirmed securities is equal to the market values of the cash flows generated by the underlying assets and the firm value is unaffected by the choice of its capital structure. So what is the relationship between MM and the price law of one price? We see that in a perfect capital market, the cash flows related to the capital providers are equal to the cash flows generated by the firms underlying assets. So the law of one price says the same, which means that the market value of the firm securities is equal to the market value of the cash flows generated by the firms underlying assets. Now if a firm's choice of securities does not alter its cash flows from the underlying assets, then this means that the firm value does not change. So the zero NPV on buying and selling of the fairly prior securities means that firm value does not change. The future debt repayment are equal to the loans upfront received by the firm and this means that there is no gain or loss using any leverage. So the value of the firm here is the function of the present value of the cash flows of a firm from its current and future investments. What is homemade leverage? We know that an investor may prefer capital structure alternative to the firm. This means that investor can borrow or lend on their own for the same results. For example, an investor wanting more leverage than the firm can borrow to add leverage to his or her own portfolio. In this case, we can define the homemade leverage which allows an investor to adjust leverage choice made by the firm. So the act of the investor is termed as the homemade leverage. And if the investor can borrow as long as at a rate equal to the firm's borrowing rate, then the homemade leverage is a best substitute for the investor. Now to understand homemade leverage, we have an example where we have an all equity firm and one of the investors preferring leverage equity is intended to have leverage in his own portfolio through buying some stock on margin loan. And he can get this risk-free margin loan against the firm's cash flows at 5% rate of interest. Now these cash flows will be treated as collateral for the margin loans. Now the investor can replicate the payoffs to the levered equity through this homemade leverage and the cost will be the 500 dollars. Now here the law of price says that value of levered equity must be equal to 500 dollars. And that we can see in the below table where in the first column the value of margin loan is 500 dollars and deducting this loan from the unlevered equity of the firm, the levered equity comes to 500 dollars for the firm. Now in another scenario, we have a firm that is using debt, but the investor is preferring to hold some unlevered equity. And for that purpose, he can replicate the payoff of the unlevered equity by buying both the securities that is debt and equity of this particular firm. Now combining the cash flows of these two particular securities, it produces the cash flows identical to the unlevered firm equity at a total cost of 1000 dollars. And that can we see in the below table where in the first column the debt has value of 500 dollars and the equity which is levered equity that has a cash flow of 500 dollars and the combined value of these two cash flows on debt and purity comes to a total of 1000 dollars and that is a cash flow that this particular investor wants to have. Now what is the conclusion from these two particular cases where a firm is wholly using the equity and the second where the firm is using the debt. We can see that in each of the two cases, the firm's choice of capital structure is not affecting its total value at all. And it does not have any effect for the opportunities available to the investor. Investor that we have seen that they can alter the leverage choice of the firm according to their personal needs. Personal needs and different choices of the capital structure do not affect the firm value in this particular perfect capital market. And this means that there are no offering of benefit to the investors in this particular market. And that is the proof that was showed by the famous M&M in their theory.