What is the major contribution of the Miller model?
A)It demonstrates that personal taxes decrease the value of using corporate debt.
B)It demonstrates that financial distress and agency costs reduce the value of using corporate debt.
C)It demonstrates that equity costs increase with financial leverage.
D)It demonstrates that debt costs increase with financial leverage.

Question

Quizplus · Accepted Answer

The Miller model extends the Modigliani-Miller theorem by incorporating personal taxes, showing that the tax advantage of corporate debt is reduced when considering personal taxes on interest income.

What Is the Major Contribution of the Miller Model