8. Modigliani and Miller models tuty Tools Aher Modigliani and Mole' (MM) originalno tax theory, they went on to develop another theory that included corporates Subsequently, Miller developed another theory that included the effects of both corporate and personales 5 AZ Tips Come the file sentencented on your understand of the MM Mode with corporatetes When personal taxes are included in the model, the trees that stockholders av on their bond andery income created by the tax savings on corporate debt Tips the benefit SU Doogee Due Landing Company has no debt, and a value of $65.000 min.Fat Cats Bankshares otherwise identical but has $26.000 million of debt in its capital structure. Under the different models, what is the value of Fat Cats Bankshares if its corporate tax rates 25%, the personal tax rate on equity is 12%, and the personal tax rate on debt is 27 (Note: Do not round intermediate cloons.) LO Stress er!) Fat Cats Bankshares Value Model MM without taxes NM with corporate tact Miler with corporate and personal taxes m Consider the following information Adding personal taxes to the modellowers, 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 taxon debt wil lower the gain from corporate et is not usually enough to eliminate it Therefore, there is still gain from everage using Mer's model, as well as the MM model with corporate tax Fat Cats Bankshares Value as Tips MM without taxes MM with corporate taxes Miller with corporate and personal taxes Tips OU Consider the following information: Stress the quiz! Adding personal taxes to the model fowers, 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 Miner's model, as well as the MM model with corporate tax Is the preceding information correct? Yes No Grade It Now Save & Continue Continue without saving