In the MM model, the value of the interest tax benefit arising from the tax-deductibility of interest cannot be readily measured.

Question

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In the Modigliani-Miller (MM) model, the value of the interest tax benefit, also known as the tax shield, can be readily measured. It is calculated based on the corporate tax rate and the amount of debt, as the interest payments on debt are tax-deductible, reducing the company's taxable income.

In the MM Model, the Value of the Interest Tax