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The market value of a levered firm can be represented by the following equation: Market value of levered firm = Market value of unlevered firm

The market value of a levered firm can be represented by the following equation:

Market value of levered firm

=

Market value of unlevered firm

Present value of tax shield

Present value of financial distress costs

Present value of agency costs

minus; plus; plus

plus; plus; plus

plus; minus; minus

minus, plus, minus

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