With corporate taxes but no personal taxes,and without financial distress,what happens?

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DIn a world with corporate taxes but no personal taxes, and without financial distress, the interest payments on debt are tax-deductible, which can reduce a firm's taxable income and thus its taxes. This creates a tax shield that makes debt financing more attractive, leading to the conclusion that the optimal amount of leverage could be 100% debt (C) because the firm would maximize its tax shield. Additionally, as a firm increases its financial leverage, the risk to debt holders increases because there is more debt that needs to be serviced. This increased risk leads to higher required returns by debt holders, meaning the costs of debt increase with financial leverage (D).

With Corporate Taxes but No Personal Taxes,and Without Financial Distress,what