What Is the Major Contribution of the Miller Model

question 63

Multiple Choice

What is the major contribution of the Miller model?

• A)It demonstrates that personal taxes decrease the value of using corporate debt.
• B)It demonstrates that financial distress and agency costs reduce the value of using corporate debt.
• C)It demonstrates that equity costs increase with financial leverage.
• D)It demonstrates that debt costs increase with financial leverage.

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Definitions:

Prices of Resources

Refers to the cost associated with the inputs required for production, including labor, capital, and materials.

Determinant of Supply

Factors that influence the quantity of a good or service that producers are willing and able to sell at a given price, such as production technology, input prices, and expectations of future prices.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers.

Excise Tax

A tax levied on specific goods, services, or transactions, often specific types of products such as gasoline, cigarettes, or alcohol.