Multiple Choice
What would happen to a firm that uses an excessive amount of debt in a world with no taxes?
A) The value of the firm would increase because of the increase in the assets of the firm.
B) The value of the firm would decrease because of the increase in the present value of distress costs.
C) It is completely irrelevant to the size of the firm.
D) The value of distress costs do not affect a firm in a tax-free world.
Correct Answer:
Verified
Correct Answer:
Verified
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