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 debt is more risky than equity; and bankruptcy is a disadvantage to debt.
E) Both bankruptcy is a disadvantage to debt; and firms will incur large agency costs of short term debt by issuing long term debt.

Question

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The Answer of 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 debt is more risky than equity; and bankruptcy is a disadvantage to debt.
E) Both bankruptcy is a disadvantage to debt; and firms will incur large agency costs of short term debt by issuing long term debt.

The MM Theory with Taxes Implies That Firms Should Issue