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If the present value of the interest tax shield on debt equals the present value of the costs of financial distress, then the trade-off theory

If the present value of the interest tax shield on debt equals the present value of the costs of financial distress, then the trade-off theory implies that the:

firm's market value equals its book value.

firm is paying too high an interest rate.

firm should increase its use of debt.

firm is using the optimal level of debt.

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