When fiRms Issue More Debt, the Tax Shield on Debt

question 52

Multiple Choice

When firms issue more debt, the tax shield on debt _____, the agency costs on debt (i.e., costs of financial distress) _____, and the agency costs on equity _____.

• A)increases; increases; increases
• B)decreases; decreases; decreases
• C)increases; increases; decreases
• D)decreases; decreases; increases
• E)increases; decreases; decreases

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