According to the Trade-Off Theory of Capital Structure

question 53

Multiple Choice

According to the trade-off theory of capital structure:

• A) optimal capital structure is reached when the present value of tax savings on account of additional borrowing is just offset by increases in the present value of costs of distress.
• B) optimal capital structure is reached when stockholders' right to default is balanced by the the bondholders' right to get interest and principal payments.
• C) optimal capital structure is reached when the benefits of limited liability is just offset by the value of the lawyers' claim.
• D) none of the above

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Definitions:

Totalitarian

A political system in which the state holds total authority over society and seeks to control all aspects of public and private life.

Propaganda

Information, especially of a biased or misleading nature, used to promote a political cause or point of view.

Terror Tactics

Methods used to instill fear and intimidation for political purposes, often involving violence or the threat of violence.

Military

Refers to the armed forces of a country, responsible for defending its borders and national interests.