【中山大学431金融 罗斯 公司理财】Ch016A.pdfVIP

Appendix: 16B: The Miller Model and the Graduated Income Tax 16.17 a. According to the Miller Model, in equilibrium: r (1 – T ) = r B C S where rB = the pre-tax cost of debt (the interest rate) TC = the corporate tax rate rS = the required return on a firm’s equity In this problem: TC = 0.35 rS = 0.11 Therefore, in order for there to be equilibrium: