The Inexpensive Nature of Long-Term Debt in a Firm's Capital

question 133

Multiple Choice

The inexpensive nature of long-term debt in a firm's capital structure is due to the fact that

• A) dividend payments are tax-deductible.
• B) equity capital has a fixed return.
• C) creditors have a higher position in the priority of claims.
• D) the equity holders are the true owners of the firm.

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Definitions:

Euphoria

A feeling or state of intense excitement and happiness.

Excitation

In psychology, a state of arousal or heightened physiological activity, often in response to a stimulus.

Tobacco

A plant whose leaves are dried and fermented before being put in tobacco products, which are consumed for nicotine.

Euphoria

A state of intense happiness and self-confidence, often more than is appropriate in a given situation, sometimes caused by drugs or manic episodes.