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6. M&M and Miller models Aa Aa E 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: MM's model that included the existence of corporate taxes concluded that is the best way to capitalize a firm. debt Doggie Due Lending Company has no debt, and a value of $40.000 million. Fat Cats Bankshares is otherwise identical but has $16.000 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 30%, the personal tax rate on equity is 12%, and the personal tax rate on debt is 27%? Fat Cats Bankshares Value Model MM without taxes MM with corporate taxes Miller with corporate and personal taxes Consider the following information: Adding personal taxes to the model lowers, but does not eliminate, the benefit from corporate debt. In the United Si e me capital gains are lower than on ordinary income and can be deferred. The effective rate on stock Consider the following information: Adding personal taxes to the model lowers, but does not eliminate, the benefit from corporate debt. In the United States, taxes on capital gains are lower than on ordinary income and can be deferred. The effective rate on stock income is normally less than that on bond income, and although the personal tax on debt will lower the gain from corporate debt, it is not usually enough to eliminate it. Therefore, there is still a gain from leverage using Miller's model, as well as the MM model with corporate tax. Is the preceding information correct? Yes