Tax Shields and Debt Ratio
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Which is correct?
1-Tax shields make debt financing more attractive, all else equal.
2-A firm's debt ratio falls when it uses excess cash to pay dividends
3-The cost of equity is low for firms that pay no dividends, all else equal.
4-Bankruptcy costs decrease the benefits of debt financing all else equal.
1 and 4
1,2 and 4
1,3 and 4
1,2,3,and 4
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The expert examines tax shields and debt ratios.
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1,3,4
Debt ratio = debt/assets
Cash used to pay dividend reduces ...
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