The Interest Tax Shield Has No Value for a fiRm

question 58

Multiple Choice

The interest tax shield has no value for a firm when: I.the tax rate is equal to zero.
II) the debt-equity ratio is exactly equal to 1.
III) the firm is unlevered.
IV) a firm elects 100% equity as its capital structure.

• A)I and III only.
• B)II and IV only.
• C)I, III, and IV only.
• D)II, III, and IV only.
• E)I, II, and IV only.

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Definitions:

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Cylinder-shaped samples from ice sheets or glaciers that scientists study to understand past climates.