In keeping with the classic approac

In keeping with the classic approach in M&M, we consider the tax consequences
of financing decisions holding fixed the firm’s operating and investment activities.
The firm can be viewedas a sequence of random, net free cash flows, which must be
raisedfrom , or distributedto the financial markets. Our objective is to compare the
present value of taxes paid under alternative means of distributing these cash flows
as dividends, interest, or through repurchases. Later, we will also briefly analyze
allowing the firm to accumulate funds internally.