a) Explain the Modigliani-Miller models of capital structure, with, and with-out, corporate income taxes.b) Many analysts do
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Question:
a) Explain the Modigliani-Miller models of capital structure, with, and with-out, corporate income taxes.b) Many analysts do not accept the assumptions of these models.Instead,suppose, in a world with corporate income taxes, due to the substantial costs of potential bankruptcy, the value of the firm's assets would be reduced if the capital structure had too much debt.What does this imply about the firm's optimal capital structure.c) how do personal taxes affect this reasoning?d) Given your understanding of behavioral finance, explain how the answers above might differ?
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