A capital structure analyst is looking into the effect of leverage on firm value. He...
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A capital structure analyst is looking into the effect of leverage on firm value. He showed the following relationship VLE VU+PV(Tax Shield)-PV(Bankruptcy Costs)-PV(Total Agency Costs) The analyst most likely: Misrepresented the relationship because he should add the PV of agency costs. Misrepresented the relationship because he should subtract he PV of depreciation tax shield. Misrepresented the relationship because he added the PV of tax shield. Misrepresented the relationship because he subtracted the PV of total agency costs. Correctly showed the relationship between leverage and frim value
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