The actual firm value is equal to the M&M Proposition I with tax value minus the financial distress costs.

Name: The actual firm value is equal to the M&M Proposition I with tax value minus the financial distress costs.
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M&M Proposition I with taxes states that the value of a leveraged firm is equal to the value of an unleveraged firm plus the tax shield on debt, but financial distress costs reduce this value.

The Actual Firm Value Is Equal to the M&M Proposition