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1. The value of a levered firm, given permanent debt level D , is Value of levered firm = Value of unlevered firm + (
1. The value of a levered firm, given permanent debt level D, is
Value of levered firm = Value of unlevered firm + (TC)(D). This assumes zero costs of financial distress.
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False
2. Risk shifting, refusing to contribute equity, and playing for time are some of the consequences of firms facing bankruptcy.
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