Answer: The firm's value remains unchanged.

**Explanation:** According to the Modigliani-Miller Proposition I (without taxes), the value of a firm is unaffected by its capital structure. The proposition states that the firm's value is determined solely by its expected future cash flows and the risk of its underlying assets, not by how it finances those assets. Therefore, increasing the proportion of debt in the capital structure does not alter the firm's value. This principle is foundational in corporate finance and underscores the irrelevance of capital structure in a perfect market without taxes.

Author: LeetQuiz Editorial Team