Which One of the Following Statements Is True

question 89

Multiple Choice

Which one of the following statements is true?

• A) The total value of a firm decreases as debt is initially added to an all equity firm, if taxes are considered.
• B) The tax shield applies to both debt and equity financing.
• C) The ideal capital structure minimizes the total tax liability.
• D) Capital structure does matter when taxes are included.
• E) The general conclusions of M&M Proposition II do not hold when taxes are considered.

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Definitions:

Different Business Area

Various sectors or divisions within a business environment that each focus on distinct operational or market-related activities.

Concentration

The action of focusing one’s attention or mental effort on a specific object, task, or activity without getting distracted.

Fast Food Chain

A business that serves quick service food across multiple outlets, focusing on convenience, speed, and consistency.

Expanding Operations

The process of increasing a company's scope of activities, which can involve entering new markets, launching new products, or increasing production capacity.