Quiz Ch 16 – Implications of Balance Between Interest Tax Shield and Financial Distress Costs

Fundamentals of Corporate Finance

Brealey, Myers, and Marcus

10th Edition

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In the trade-off theory, if the present value of the interest tax shield on debt matches the present value of the costs of financial distress, what does this suggest?

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  • Search Terms: a) an book costs debt debt. debt. b) distress, equals financial firm firm's high if implies increase interest is its level market of on optimal paying present rate. c) shield should tax that the the: then theory too trade-off use using value value. d)
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