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Firm A and Firm B are alike in every way except that Firm A is financed entirely with equity and Firm B has $5,000,000 in
Firm A and Firm B are alike in every way except that Firm A is financed entirely with equity and Firm B has $5,000,000 in equity and $5,000,000 in debt (paying 4% interest) outstanding. Holding all other factors constant, an increase in the corporate tax rate would ________.
Select one:
A.
have no impact on the value of either firm
B.
have no impact on the difference between the values of the two firms
C.
widen the difference between the values of the two firms
D.
narrow the difference between the values of the two firms
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