$($CHAPTER $17)$

From the theory about firm's capital structure by Merton Miller and Franco Modigliani, we know that for a tax$-$paying firm there are two effects of having a larger debt amount.

First, this the firm's value. That's because the

annual tax deductions $,$ this in turn

taxes paid by the firm each year, and as a result the current value of the interest tax shield.

Second, this the firm's value. That's because the present value of the expected future financial distress costs $[$ Select $]$ increase don't change decrease