According to the static theory of capital structure, ____________________.
A) A firm's choice of assets and operations is fixed for all time.
B) A firm will borrow up to the point where the benefit from an extra dollar of debt is just equal to the tax benefit associated with that debt.
C) The value of the firm will differ from the M&M value without taxes by the gain from leverage.
D) The optimal WACC is the same as it is in M&M with taxes.
E) The value of the firm in M&M with taxes is overstated by the amount of financial distress costs.

Question

Quizplus · Accepted Answer

The Answer of According to the static theory of capital structure, ____________________.
A) A firm's choice of assets and operations is fixed for all time.
B) A firm will borrow up to the point where the benefit from an extra dollar of debt is just equal to the tax benefit associated with that debt.
C) The value of the firm will differ from the M&M value without taxes by the gain from leverage.
D) The optimal WACC is the same as it is in M&M with taxes.
E) The value of the firm in M&M with taxes is overstated by the amount of financial distress costs.

According to the Static Theory of Capital Structure, ____________________