Please refer to the curved line in figure 14.8 on page 486 in the textbook the reason for the following: The line initially has an upward slope, but gradually begins to slope downward as you move further out along the horizontal axis. This figure is regarding the "Trade-Off Theory".

operating income (Ebn) to flow through to investors. This act Effect of Financial Leverage on the Value FIGURE 14.8 of Bigbee's Stock Value of Bigbee's Stock MM Result Incorporating the Effects of Corporate Taxation: Price of the Stock If There Were No Bankruptcy-Related Value Added by Costs Debt Tax Shelter Value Reduced by Benefits Bankruptcy-Related Costs Actual Price of Stock Value of the Stock S20 Value of Stock If the Firm Used No Financial Leverage D1 Do Leverage, Debt/Ratio Threshold Debt Level Optimal Capital Structure Where Bankruptcy Costs Become Material Marginal Bankruptcy-Related Costs