FIN 540 - Homework Chapter 21 Answers

Directions: Answer the following five questions on a separate document. Explain how you reached the

answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using

the assignment link in the course shell. Each question is worth five points apiece for a total of 25 points

for this homework assignment.

1. The major contribution of the Miller model is that it demonstrates that

a. personal taxes decrease the value of using corporate debt.

b. financial distress and agency costs reduce the value of using corporate debt.

c. equity costs increase with financial leverage.

d. debt costs increase with financial leverage.

e. personal taxes increase the value of using corporate debt.

1. Which of the following statements...