Assume a zero corporate tax rate. Because both the risk of a firm's equity and debt increase

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Assume a zero corporate tax rate. Because both the risk of a firm's equity and debt increase with debt financing, then the value of the firm should decrease when it uses more and more debt. True or false?

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Finance for Executives Managing for Value Creation

ISBN: 978-0538751346

4th edition

Authors: Gabriel Hawawini, Claude Viallet

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Question Posted: Mar 27, 2015 10:01 AM

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Assume a zero corporate tax rate. Because both the risk of a firm's equity and debt increase

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This statement is false An increase in debt financing has two consequences 1 An incr...View the full answer

Finance for Executives Managing for Value Creation

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