The introduction of tax benefit pushes the bias towards very high gearing levels to obtain lower WACC and higher value. What is the main reason why we do not observe such high gearing in real- world companies?
A) The higher risk to the firm of financial distress
B) The increasing risk of financial distress borne by finance providers
C) The lower risk to the finance providers of liquidation
D) The lower risk to the firm of financial distress
Correct Answer:
Verified
Q35: For a particular share the dividend to
Q36: Which three of the following factors have
Q37: What name is given to the ratio
Q38: What is X in the formula X
Q39: What of the following best describe the
Q41: Which of the following options best explains
Q42: Which of the following best describes what
Q43: When selecting the weights to be used
Q44: What term is used for the weighted
Q45: Which assumption is necessary for the formula
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents