Which of the following statements is MOST correct concerning a corporation's optimal capital
structure?
A) The optimal capital structure minimizes the present value of financial distress costs and
agency costs.
B) The optimal capital structure occurs where the present value of the interest tax shield equals
the present value of the firm's bankruptcy costs.
C) The optimal capital structure maximizes the present value of the interest tax shield.
D) The optimal capital structure occurs at the point where the market value of the levered firm is
maximized.
D
You might also like to view...
Companies have acted on the false assumption that sustainability will add costs and decrease their competitiveness
Indicate whether the statement is true or false
Market-penetration, product-development, and market-development strategies would all be examples of ________ strategies
A) concentric growth B) conglomerate C) horizontal D) intensive growth E) integrative growth
Which of the following was NOT discussed as a method of evaluating secondary data?
A) What was the purpose of the study? B) Who collected the information? C) How readily available is the information to the public? D) How consistent is the information with other information? E) What information was collected?
Answer the following statement(s) true (T) or false (F)
1. The SBA often guarantees long-term debt financing from a bank for a new business. 2. Most long-term loan agreements act as a promissory note and require some form of collateral. 3. Stocks and bonds are forms of long-term equity financing. 4. The details of a bond agreement (maturity date and rate of interest) are spelled out in agreements called a debenture. 5. Generally, the lower the quality of the bond, the higher the interest rate paid to bondholders.