According to trade-off theory, the total 20 value of a levered firm equals the value...
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According to trade-off theory, the total 20 value of a levered firm equals the value of the firm without leverage plus the 2 present value of the tax savings from debt, less the present value of financial distress costs: 20 VL = VU + PV(Interest Tax Shield) PV(Financial Distress Costs) V = levered value of the firm W = unlevered value of the firm 20 According to trade-off theory, how is capital structure determined? (40 points)
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