According to the static theory of capital structure, value-maximizing ﬁnancial managers will borrow
to the point where the ﬁrm's business risk is just equal to its ﬁnancial risk.

Question

Quizplus · Accepted Answer

The static theory of capital structure suggests that firms should borrow up to the point where the tax shield from debt equals the costs of financial distress, not where business risk equals financial risk.

According to the Static Theory of Capital Structure, Value-Maximizing ﬁNancial