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From the theory about firm's capital structure by Merton Miller and Franco Modigliani, we know that for a tax-paying firm there are two effects of
From the theory about firm's capital structure by Merton Miller and Franco Modigliani, we know that for a tax-paying firm there are two effects of having a lower debt amount. First, this financial distress costs the firm's value. That's because the present value of the expected future Second, this turn interest tax shield. the firm's value. That's because the annual tax deductions taxes paid by the firm each year, and as a result the current value of the this in
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