Loan with interest obligation will create extra liabilities on Geared Company... This always results in decrease in the value of Company by exact amount of loan. Increase in gearing decrease in value of business for share holders.

WACOC is fixed not decreasing with increase in Gearing.

Value of tax for all companies remains same.

Debt providers always invest at the stake of equity for more protection.

Whether it is a tax world or No tax world, value of a company entirely depends upon the relation of actual rate of return (Ra) received by the equity holders, with the expected rate of return (Re) by equity holders.