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.

Question

Quizplus · Accepted Answer

The Miller model incorporates personal taxes into the valuation of corporate debt, showing that personal taxes can offset the tax benefits of debt, thus decreasing its value.

The Major Contribution of the Miller Model Is That It