The MM theory with taxes implies that firms should issue maximum debt.In practice, this is not true because:
A) debt is more risky than equity.
B) bankruptcy is a disadvantage to debt.
C) firms will incur large agency costs of short term debt by issuing long term debt.
D) Both A and B.
E) Both B and C.
Correct Answer:
Verified
Q1: The optimal capital structure:
A) will be the
Q2: Although the use of debt provides tax
Q4: Given realistic estimates of the probability and
Q6: One of the indirect costs of bankruptcy
Q8: In a world with taxes and financial
Q9: Corporations in the U.S. tend to:
A) minimize
Q12: The value of a firm is maximized
Q15: The explicit and implicit costs associated with
Q16: Conflicts of interest between stockholders and bondholders
Q17: In general,the capital structures used by U.S.
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