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.

Question

Quizplus · Accepted Answer

The Miller model shows that personal taxes lower the value of using corporate debt. This is because personal taxes reduce the after-tax return to investors, making debt less attractive compared to equity financing.

A Major Contribution of the Miller Model Is That It