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Suppose that you are considering a firm under three separate scenarios: 1) no debt, taxes or bankruptcy costs, 2) with debt and taxes but no

Suppose that you are considering a firm under three separate scenarios: 1) no debt, taxes or bankruptcy costs, 2) with debt and taxes but no bankruptcy costs, and 3) with debt, taxes, and bankruptcy costs.

Under which one of these three scenarios will the firm have the highest value? Why?

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