3 Because costs of financial distress can be reduced but not eliminated, firms will not finance entirely

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3 Because costs of financial distress can be reduced but not eliminated, firms will not finance entirely with debt. Figure 19.1 illustrates the relationship between firm value and debt. In the figure, firms select the debt–equity ratio at which firm value is maximized.

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Corporate Finance

ISBN: 9781526848093

4th Edition

Authors: David Hillier

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