The Interest Tax Shield Is a Key Reason Why

question 79

Multiple Choice

The interest tax shield is a key reason why:

• A)the required rate of return on assets rises when debt is added to the capital structure.
• B)the value of an unlevered firm is equal to the value of a levered firm.
• C)the net cost of debt to a firm is generally less than the cost of equity.
• D)the cost of debt is equal to the cost of equity for a levered firm.
• E)firms prefer equity financing over debt financing.

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Definitions:

District Attorney

A public official who represents the government in the prosecution of criminal offenses within a specific judicial district.

Attorney General

The principal legal officer who represents a country or a state in legal matters and gives legal advice to the government.

Prosecuted

This involves legal proceedings against an individual or entity for the commission of a crime, leading to a trial and potentially a conviction.

Probable Cause

Reasonable grounds for believing that a search should be conducted or that a person should be arrested.