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The trade off theory suggests: Question 21 options: As debt increases, tax benefits of debt increase until interest expense exceeds EBIT. Probability of default, and

The trade off theory suggests: Question 21 options: As debt increases, tax benefits of debt increase until interest expense exceeds EBIT. Probability of default, and hence present value of financial distress costs, also increases The optimal level of debt occurs when the value of the levered firm is maximised. All the options provided

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