The Optimal Capital Structure Will Tend to Include More Debt

question 66

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.

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Definitions:

Reward Power

The capacity to offer something of value as a means to influence the behavior of others.

Influence

The capacity to have an effect on the behavior, development, or character of someone or something.

Value

The importance, worth, or usefulness of something, often determining its desirability or the principles held by individuals or organizations.

Positive Face

The desire or need of an individual to be appreciated and approved by others in social interactions.