The Interest Tax Shield Is a Key Reason Why

question 147

Multiple Choice

The interest tax shield is a key reason why:

• A) The required rate of return on assets rises when debt is added to the capital structure.
• B) The value of an unlevered firm is equal to the value of a levered firm.
• C) The net cost of debt to a firm is generally less than the cost of equity.
• D) The cost of debt is equal to the cost of equity for a levered firm.
• E) Firms prefer equity financing over debt financing.

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Definitions:

Member Unions

Organizations that belong to a larger federation or confederation of labor unions, representing various sectors or professions.

Represent

To act or speak officially for someone or something, especially in a legal or political context.

AFL-affiliated Unions

Unions that are members of the American Federation of Labor (AFL), a national federation of labor unions in the United States.

Women

Adult human females, often highlighted in discussions about gender equality, workforce participation, and rights.