A major contribution of the Miller model is that it demonstrates, other things held constant, that:...
| A major contribution of the Miller model is that it demonstrates, other things held constant, that: |
| a) personal taxes increase the value of using corporate debt. |
| b) personal taxes lower the value of using corporate debt. |
| c) personal taxes have no effect on the value of using corporate debt. |
| d) financial distress and agency costs reduce the value of using corporate debt. |
| e) debt costs increase with financial leverage |
Pl elaborate in at least 100 words. Thank you
Homework Answers
Solution :- The correct answer is (B) that is
A major contribution of the Miller model is that it demonstrates, other things held constant, that
personal taxes decease the value of using corporate debt.
After Modigliani and Miller's (MM) original no-tax theory, they went on to develop another theory that included corporate taxes. Subsequently, Miller developed another theory that included the effects of both corporate and personal taxes.
As the share holder can pay personal tax on the their income and as personal tax increase this is not beneficial in favour of share holders
Add Answer to:
A major contribution of the Miller model is that it demonstrates,
other things held constant, that:...
The major contribution of the Miller model is that it demonstrates that a. personal taxes decrease...
The major contribution of the Miller model is that it demonstrates that a. personal taxes decrease the value of using corporate debt. b. financial distress and agency costs reduce the value of using corporate debt. c. equity costs increase with financial leverage. d. debt costs increase with financial leverage. e. personal taxes increase the value of using corporate debt.
Which of the following statements concerning capital structure theory is NOT CORRECT? The major contribution of...
Which of the following statements concerning capital structure theory is NOT CORRECT? The major contribution of Miller's theory is that it demonstrates that personal taxes decrease the value of using corporate debt. Under MM with zero taxes, financial leverage has no effect on a firm's value. Under MM with corporate taxes, the value of a levered firm exceeds the value of the unlevered firm by the product of the tax rate times the market value dollar amount of debt. Under...
Other things held constant, a decline in sales accompanied by an increase in financial leverage must...
Other things held constant, a decline in sales accompanied by an increase in financial leverage must result in a lower profit margin. a. True b. False
8. M&M and Miller models After Modigliani and Miller's (MM) original no-tax theory, they went on ...
8. M&M and Miller models After Modigliani and Miller's (MM) original no-tax theory, they went on to develop another theory that included corporate taxes. Subsequently, Miller developed another theory that included the effects of both corporate and personal taxes Complete the following sentence based on your understanding of the MM Model with corporate taxes: the benefit When personal taxes are included in the MM model, the taxes that stockholders pay on their bond and equity income created by the tax...
Respecfully--Please answer all if you are willing to help. This is over MM propositions anf optimal...
Respecfully--Please answer all if you are willing to help. This is
over MM propositions anf optimal capital structure theories
QUESTION 1 With perfect capital markets, because different choices of capital structure offer a benefit to investors, the capital structure affects the value of a firm. True False QUESTION 2 Under the assumptions of Modigliani and Miller, a firm's value does not depend on the fraction of its financing that it raises from debt holders vs. equity holders. True False QUESTION...
Tom is interested in gaining additional insights into capital structure issues and has asked Walt to...
Tom is interested in gaining additional insights into capital structure issues and has asked Walt to brief him in the area. He wants a basic review of the terminology but is particularly interested in the impact of different types of risk and in understanding of the better-known financial theorists. Walt knew that Tom could grasp complex issues quickly and felt that a thorough discussion of Modigliani and Miller’s work would be appropriate. He also felt that Miller’s addition of personal...
Capital Structure Theory Modern capital structure theory began in 1958 when Professors Modigliani and Miller (MM)...
Capital Structure Theory Modern capital structure theory began in 1958 when Professors Modigliani and Miller (MM) published a paper that proved under a restrictive set of assumptions that a firm's value is unaffected by its capital structure. By indicating the conditions under which capital structure is irrelevant, they provided dues about what is required to make capital structure relevant and impact a firm's value. In 1963 they wrote a paper that included the impact of corporate taxes on capital structure....
Capital Structure Theory Modern capital structure theory began in 1958 when Professors Modigliani and Miller (MM)...
Capital Structure Theory Modern capital structure theory began in 1958 when Professors Modigliani and Miller (MM) published a paper that proved under a restrictive set of assumptions that a firm's value is unaffected by its capital structure. By indicating the conditions under which capital structure is irrelevant, they provided dues about what is required to make capital structure relevant and impact a firm's value. In 1963 they wrote a paper that included the impact of corporate taxes on capital structure....
Mort Moore founded Moore Plumbing Supply after returning from duty in the South Pacific during World...
Mort Moore founded Moore Plumbing Supply after returning from duty in the South Pacific during World War II. Before joining the armed forces, he had worked for a locally owned plumbing company and wanted to continue with that type of work once the war effort was over. Shortly after returning to his hometown of Minneapolis, Minnesota, he became aware of an unprecedented construction boom. Returning soldiersneeded new housing as they started families and readjusted to civilian life. Mort felt that...
1) Present value calculations: A) are appropriate for investments in the same time period B) are...
1) Present value calculations: A) are appropriate for investments in the same time period B) are accurate only in a low-rate environment C) provide comparisons for investments when inflation is known D) provide a common reference for measuring investments at different maturities 2) Compounding refers to: A) the calculation of interest rates after allowing for the effect of taxes B) the process of earning interest on interest of an investment C) the repayment of both interest and principal at the...
Other things held constant, a decline in sales accompanied by an increase in financial leverage must result in a lower profit margin. a. True b. False
8. M&M and Miller models After Modigliani and Miller's (MM) original no-tax theory, they went on to develop another theory that included corporate taxes. Subsequently, Miller developed another theory that included the effects of both corporate and personal taxes Complete the following sentence based on your understanding of the MM Model with corporate taxes: the benefit When personal taxes are included in the MM model, the taxes that stockholders pay on their bond and equity income created by the tax...
Respecfully--Please answer all if you are willing to help. This is
over MM propositions anf optimal capital structure theories
QUESTION 1 With perfect capital markets, because different choices of capital structure offer a benefit to investors, the capital structure affects the value of a firm. True False QUESTION 2 Under the assumptions of Modigliani and Miller, a firm's value does not depend on the fraction of its financing that it raises from debt holders vs. equity holders. True False QUESTION...
Capital Structure Theory Modern capital structure theory began in 1958 when Professors Modigliani and Miller (MM) published a paper that proved under a restrictive set of assumptions that a firm's value is unaffected by its capital structure. By indicating the conditions under which capital structure is irrelevant, they provided dues about what is required to make capital structure relevant and impact a firm's value. In 1963 they wrote a paper that included the impact of corporate taxes on capital structure....
Capital Structure Theory Modern capital structure theory began in 1958 when Professors Modigliani and Miller (MM) published a paper that proved under a restrictive set of assumptions that a firm's value is unaffected by its capital structure. By indicating the conditions under which capital structure is irrelevant, they provided dues about what is required to make capital structure relevant and impact a firm's value. In 1963 they wrote a paper that included the impact of corporate taxes on capital structure....
1) Present value calculations: A) are appropriate for investments in the same time period B) are accurate only in a low-rate environment C) provide comparisons for investments when inflation is known D) provide a common reference for measuring investments at different maturities 2) Compounding refers to: A) the calculation of interest rates after allowing for the effect of taxes B) the process of earning interest on interest of an investment C) the repayment of both interest and principal at the...
Most questions answered within 3 hours.
-
By 2025, annual consumption in emerging markets will total $30
trillion and contribute more than ________...
asked 49 seconds ago -
At what point does reformation cease to be a viable option for
those who are oppressed...
asked 4 minutes ago -
When rolling a die 129 times, what is the probability of rolling
a 6 no more...
asked 3 minutes ago -
Place letters corresponding to amounts in the proper order for
lightest to heaviest samples:
a) 2100...
asked 9 minutes ago -
Consider the multicore processor with 6 heterogeneous cores
labelled C1, C2, C3, C4, C5, and C6....
asked 11 minutes ago -
Document system components according to standards and procedures
(Implement and hand over system components) IT administrative
asked 12 minutes ago -
The college asked 700 students if they wanted a longer spring
break and 600 students said...
asked 11 minutes ago -
Determine the temperature (in Celsius) at which 1.00 mole of an
ideal gas will have a...
asked 35 minutes ago -
Japan’s combination of X and Y
Canada’s combination of X and Y
100x and 0y
50x...
asked 28 minutes ago -
[1] Household statistics include individuals living alone or in
groups in:
A) apartments.
B) military barracks....
asked 38 minutes ago -
What is the % w/v when 80 mL of a 2.0% solution is mixed with 50...
asked 42 minutes ago -
How can I solve the following using a TI83
Claim: Most adults would erase all of...
asked 55 minutes ago