question archive Below is the formula for the 'gains from leverage' GL, from Miller (1977): GL = (1 - (1 - tc)*(1 - tps)/(1-tpb))*BL Where: tc is the corporate tax rate; tps is the personal income tax rate applicable to income from common stock, tpb is the personal income tax rate applicable to income from bonds; and BL is the market value of the levered firm's debt
Below is the formula for the 'gains from leverage' GL, from Miller (1977): GL = (1 - (1 - tc)*(1 - tps)/(1-tpb))*BL Where: tc is the corporate tax rate; tps is the personal income tax rate applicable to income from common stock, tpb is the personal income tax rate applicable to income from bonds; and BL is the market value of the levered firm's debt
Subject:FinancePrice: Bought3
Below is the formula for the 'gains from leverage' GL, from Miller (1977): GL = (1 - (1 - tc)*(1 - tps)/(1-tpb))*BL Where: tc is the corporate tax rate; tps is the personal income tax rate applicable to income from common stock, tpb is the personal income tax rate applicable to income from bonds; and BL is the market value of the levered firm's debt. If (1- tpb) = (1 - tc)(1 - tps), then the gains from leverage 'GL' are:
Select one:
a. Positive.
b. Zero.
c. Negative.
d. Not enough information.
