Question
The main difference between MM II (Modigliani Miller Model with Corporate Taxes) and Miller Model with Corporate and Personal Taxes is: MM II concludes that
The main difference between MM II (Modigliani Miller Model with Corporate Taxes) and Miller Model with Corporate and Personal Taxes is:
| MM II concludes that a capital structure with 100% debt is optimal but the Miller Model states that a capital structure with 100% equity is optimal. | ||
| MM II concludes that a capital structure with 100% equity is optimal but the Miller Model states that a capital structure with 100% debt is optimal. | ||
| Both conclude that a levered firm's value will be higher than an unlevered's firm but the size of that advantage is bigger in MM II's model. | ||
| Both conclude that a levered firm's value will be higher than an unlevered's firm but the size of that advantage is smaller in MM II's model. | ||
| There is no difference between these two models, they both conclude that capital structure is irrelevant but they base their conclusion on different arguments. |
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