The Managerial Implications of Capital Structure Theory Include All Except

question 18

Multiple Choice

The managerial implications of capital structure theory include all except which of the following?

• A) Capital structure changes transmit important information to investors.
• B) Changes in capital structure result in changes in the market value of the firm's equity.
• C) Optimal capital structure is influenced heavily by the business risk facing the firm.
• D) Tax shield benefits from equity lead to increased firm value.

---

Definitions:

Depreciated Value

The reduced valuation of an asset after accounting for wear and tear, age, or obsolescence.

Market Value

The price at which an asset would trade in a competitive auction setting.

Opportunity Cost

The expense incurred from bypassing the next most favorable choice when a decision is made.

Tax Rate

The percentage at which an individual or corporation is taxed by the government.