This question is a follow-up to Question A.1 on Millers model. In comparing this approach to M&M

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This question is a follow-up to Question A.1 on Miller’s model. In comparing this approach to M&M with corporate taxes, you can see that in one case both models imply that firms should use 100 percent debt financing. Explain how this conclusion occurs in each case. Why does it not occur in practice?

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Fundamentals of Corporate Finance

ISBN: 978-0071051606

8th Canadian Edition

Authors: Stephen A. Ross, Randolph W. Westerfield

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