Which of the Following Makes This a True Statement? in This

question 17

Multiple Choice

Which of the following makes this a true statement? In this slightly more realistic world with corporate taxes, managers can:

• A) minimize the firm's value by taking on as much debt as possible.
• B) maximize the firm's value by taking on as much debt as possible.
• C) maximize the firm's value by taking on as much equity as possible.
• D) maximize the firm's value by financing only with debt.

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Definitions:

Cash Break-Even

The point at which a business's cash inflows exactly match its cash outflows, exclusive of financing, indicating no net cash gain or loss.

Straight-Line Depreciation

A tactic for apportioning the cost of a physical asset over its effective lifespan in identical yearly expenditures.

Fixed Costs

Expenses that do not change with the level of goods or services produced over a short period.

Operating Cash Flow

A measure of the amount of cash generated by a company's normal business operations, indicating whether a company can generate sufficient positive cash flow to maintain and grow its operations.