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Firm Short and Firm Long are both decreasing debt in their capital structures by adding equity to pay off outstanding loans. Firm Short raises $5

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Firm Short and Firm Long are both decreasing debt in their capital structures by adding equity to pay off outstanding loans. Firm Short raises $5 million from equity to pay off short term debt in the current year. After this year, Firm Short plans to increase its debt amount back to prior levels. Firm Long raises $5 million from equity that will be perpetually remain part of the firm's capital structure, permanently reducing debt in the firm. If both firms pay taxes but no other capital market imperfections exist (bankruptcy costs, etc.), how will the removal of debt impact the firm values of these two firms? W Both firm values are unchanged Value of Long will decrease more than the value of Short O Value of Short and Long will increase the same amount O Value of Long will increase more than the value of Short O Value of Short and Long will decrease the same amount

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