In a world with corporate and personal taxes,but no bankruptcy costs,
A) a firm's value is unaffected by capital structure.
B) a firm should maximize its value by maximizing its debt.
C) a firm should borrow to the point where the marginal benefits of debt equal the marginal costs.
D) there are usually gains to firm value associated with the use of debt, but the gains are not as large as those predicted by M&M's corporate tax model.
Correct Answer:
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