The Optimal Capital Structure Will Tend to Include More Debt

question 92

Multiple Choice

The optimal capital structure will tend to include more debt for firms with:

• A) The highest depreciation deductions.
• B) The lowest marginal tax rate.
• C) Substantial tax shields from other sources.
• D) Lower probability of financial distress.
• E) Less taxable income.

---

Definitions:

Penalty

A financial charge imposed on an individual or entity for violating regulations or failing to comply with legal obligations.

Tax Due

The amount of tax owed to a government, typically determined after performing a calculation based on income and allowable deductions.

Social Security

A federal program in the United States that provides retirement benefits, disability income, and survivors benefits to eligible Americans.

Limit

The maximum amount, quantity, or level permitted, often used in financial contexts to describe caps on deductions, contributions, or benefits.