Question: When [(1 tC) (1 tS) = (1 tB)], then the: tax shield on debt is exactly offset by higher capital gains. firm should hold no

When [(1 tC) (1 tS) = (1 tB)], then the:

tax shield on debt is exactly offset by higher capital gains.

firm should hold no debt.

value of the levered firm is greater than the value of the unlevered firm.

cash flow to stockholders equals the cash flow to bondholders.

tax shield on debt is exactly offset by higher levels of dividends.

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