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If a tax paying firm went from zero debt to successively higher levels of debt, why would you expect its stock price to rise? Note:
If a tax paying firm went from zero debt to successively higher levels of debt, why would you expect its stock price to rise? Note: beyond a point, excessive use of debt would cause the stock price to then hit a peak, and then begin to decline.
None of the other alternatives are acceptable reasons.
All of the other alternatives are acceptable reasons why one expects stock value to rise if a tax paying firm went from zero debt to successively higher levels of debt
Debt payments, ie interest payments, are a taxdeductible expense, which creates a debt tax shield
concentration of ownership ie increased use of "other people's money" on operating the firm
debt is a cheaper cost of capital, thus the use of debt decreases the financing expenses for the firm.
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