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Which one of the following statements concerning the interest tax shield is correct assuming a firm has positive net income and is subject to taxation?

The value of the interest tax shield rises as tax rates decline.

The value of the interest tax shield is inversely related to the amount of financial leverage employed.

The present value of the tax shield is equal to (T_C x R_D) / D.

The value of the interest tax shield is directly related to the firm's earnings before interest and taxes.

The present value of the tax shield is equal to T_C x D.

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Financial Management, Finance

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