Modigliani-Miller equation
In Modigliani-Miller equation, why is market value of the levered firm is more than the market value of an equivalent unlevered firm?
Expert
Levered firm has a greater market value since less money is taken from the firm through the government in taxes due to tax-deductible interest payments. Therefore, there is more cash left for the investor groups rather than when the firm is financed with all-equity funds.
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