PPT Slide
Suppose investors are subject to the following tax rates: Td = 30% and Ts = 25%. What is the gain from leverage according to the Miller model?
Miller’s Proposition I:
VL = VU + [1 - ]D.
Tc = corporate tax rate.
Td = personal tax rate on debt income.
Ts = personal tax rate on stock income.
(1 - Tc)(1 - Ts)
(1 - Td)
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