Recently, Jan Mossin presented a security pricing model within the framework of a market equilibrium theory. The model is based on particular preference structures of investors, specified in terms of quadratic utility functions with final wealth as the argument of the functions. As an implication of his model for the firm's optimal investment policy, Mossin demonstrates how Proposition III put forth by Franco Modigliani and Merton Miller (1958) can be validated. In addition, the analysis is extended to suggest investment criteria for investments with completely arbitrary yield characteristics. The purpose of this comment is twofold. First, to show that Mossin's proof of the validity of M-M's Proposition III is questionable, given his assumptions. Second, an attempt is made to show how a troublesome assumption of Mossin's analysis could possibly be eliminated. For the sake of exposition, Mossin's securitv pricing model as shown on page 752, equation (6), is stated below with all relevant definitions:

The traditional valuation framework is unsuited to the task of valuing a growth stock when the capitalization rate is specified in terms of market leverage, simply because it is impossible to maintain a constant ratio of book to market leverage over the growth horizon. This severely limits the usefulness of the traditional model in analyzing the valuation problem. We have proposed a more general form of the model which allows us to show the consistency between M-M's Propositions I and II under growth.