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5. Modigliani and Miller show that the extent to which interest payments can be used to reduce the tax burden, then the use of debt
5. Modigliani and Miller show that the extent to which interest payments can be used to reduce the tax burden, then the use of debt provides benefits for the owner of the company, unfortunately these benefits will be penalized by bankruptcy costs, theoretically the company should use debt which will minimize the company's cost of capital. The question is how does the company make funding decisions? Explain in your opinion?
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