Modigliani miller model with corporate taxes

Assignment Help Financial Management

Reference no: EM13911642

The main difference between MM II (Modigliani Miller Model with Corporate Taxes) and Miller Model with Corporate and Personal Taxes is:

MM II concludes that a capital structure with 100% debt is optimal but the Miller Model states that a capital structure with 100% equity is optimal.

MM II concludes that a capital structure with 100% equity is optimal but the Miller Model states that a capital structure with 100% debt is optimal.

Both conclude that a levered firm's value will be higher than an unlevered's firm but the size of that advantage is bigger in MM II's model.

Both conclude that a levered firm's value will be higher than an unlevered's firm but the size of that advantage is smaller in MM II's model.

There is no difference between these two models, they both conclude that capital structure is irrelevant but they base their conclusion on different arguments.

Reference no: EM13911642

Questions Cloud

Combination reaction to yield ammonia : Under appropriate conditions, nitrogen and hydrogen undergo a combination reaction to yield ammonia: N2 + 3H2 >> 2NH3 If the reaction yield is 87.5% , how many moles of N2 are needed to produce 3.00 mol of NH3?

Find mean deviation of the distribution of raw exam scores : The students receive raw scores of 63 and 93, which correspond to z scores (often called the standard- ized scores) of -1 and 1.5, respectively. Find the mean and standard deviation of the distribution of raw exam scores.

Kleener company acquired a new delivery truck : Kleener Co. acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $52,000 and has an estimated useful life of four years and an estimated salvage value of $8,000.

Associated with business risk : Which of the following is NOT associated with (or does not contribute to) business risk? Recall that business risk is affected by a firm's operations.

Modigliani miller model with corporate taxes : The main difference between MM II (Modigliani Miller Model with Corporate Taxes) and Miller Model with Corporate and Personal Taxes is:

How to calculate both the gross and net autopsy rate : Define and differentiate between the gross autopsy rate and the net autopsy rate and Include illustrations of how to calculate both the gross and net autopsy rate

What is the reward-to-volatility ratio for the equity fund : You manage an equity fund with an expected risk premium of 11% and a standard deviation of 24%. The rate on Treasury bills is 6.2%. Your client chooses to invest $80,000 of her portfolio in your equity fund and $20,000 in a T-bill money market fund. ..

The sale of assets to liquidate a partnership is called : The sale of assets to liquidate a partnership is called

Flagship product battlin bobby : You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product,..

User Account

All Pages