Drop down for "equity income ... the benefits created" (will offset / are added to)

Answers for "MM without taxes" (106M / 57M / 50M / 78M)

Answers for "MM with corporate taxes" ( 57M / 106M / 44M / 84.36M)

Answers for "Miller with corporate and personal taxes" are given.

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8. M&M and Miller models Aa Aa After Modigliani and Miller's (MM) original no-tax theory, they went on to develop another theory that included corporate taxes. Subsequently, Miller developed another theory that included the effects of both corporate and personal taxes. Complete the following sentence based on your understanding of the MM Model with corporate taxes When personal taxes are included in the MM model, the taxes that stockholders pay on their bond and equity income will offset the benefit created by the tax savings on corporate debt. Doggie Due Lending Company has no debt, and a value of $50.000 million. Fat Cats Bankshares is otherwise identical but has $20.000 million of debt in its capital structure. Under the different models, what is the value of Fat Cats Bankshares if its corporate tax rate is 35%, the personal tax rate on equity is 12%, and the personal tax rate on debt is 28%? Fat Cats Bankshares Value Model MM without taxes MM with corporate taxes Miller with corporate and personal taxes $$65.9 million $54.120 million $106.000 million $57.000 million Consider the following information