Match each of the following definitions to the appropriate terms: 4 TERMS TERMS Independence theory-with corporate taxes

Match each of the following definitions to the appropriate terms: 4 TERMS

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TERMS Independence theory-with corporate taxes Independence theory-no taxes DEFINITIONS The cost of capital is unaffected by the firm's choice of debt and equity financing. The cost of capital decreases as the fim initially uses debt to substitute for equity financing but eventually begins to increase as extreme levels of debt are used The cost of capital decreases continuously as the firm increases its reliance on debt financing. Saucer-shaped cost of capital curve