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In the Miller-Modigliani world WITH taxes, when a firm increases its leverage by issuing debt and repurchasing shares, which of the following statements is/are TRUE?
In the Miller-Modigliani world WITH taxes, when a firm increases its leverage by issuing debt and repurchasing shares, which of the following statements is/are TRUE? Select ALL that apply. The value of the firm increases due to the present value of the tax shield The value of the firm decreases due to the present value of the tax shield The value of the firm remains unchanged The cost of equity increases because equity becomes more risky The cost of equity decreases because equity becomes less risky The cost of equity remains unchanged The free cash flow of the firm increases because of the tax deductibility of interest The free cash flow of the firm decreases because of the interest payments The free cash flow of the firm remains unchanged The WACC of the firm increases The WACC of the firm decreases The WACC of the firm remains unchanged
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