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How do we know if expansion is a good idea for the firm?
Interest Tax Shield
The tax saving attained by a firm from interest expense.
M&M Proposition II
A theory by Modigliani and Miller that suggests the cost of equity is a linear function of the company's debt/equity ratio, under a no-tax environment.
Financial Risk
The possibility of losing money on an investment or business venture due to various financial factors.
Return on Assets
An indicator of how profitable a company is relative to its total assets, calculated as net income divided by total assets.
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