Capital structure increase firm value

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Reference no: EM131539557

Given corporate taxes, why does adding debt to the capital structure increase firm value?

A. Extra cash flow goes to the firm's investors rather than the tax authorities

B. Earnings before interest and taxes are fully taxed at the corporate rate

C. Personal tax rates are the same as marginal corporate rates

D. The Relative Advantage of Debt consistently proves that it is better to issue debt than sell securities.

Reference no: EM131539557

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