The Static Theory of Capital Structure Supports the Theory That

question 98

Multiple Choice

The static theory of capital structure supports the theory that value-maximizing managers will:

• A) Look to the asset side of the balance sheet to increase firm value since the mix of debt and equity selected is unlikely to affect firm value.
• B) Not concern themselves with the capital structure of the firm as it is an irrelevant issue.
• C) Select the capital structure for which the cost associated with the probability of financial distress equals the benefit of the interest tax shield.
• D) Select an all equity capital structure to ensure the value of the firm is maximized.
• E) Select the capital structure which maximizes the interest tax shield.

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Definitions:

Business Messages

Formal communication conveyed through various mediums within a professional setting.

Select The Medium

The process of choosing the most appropriate channel or form of communication to convey a message effectively to the intended audience.

Knowing What

Refers to the understanding or knowledge of specific information or principles.

Audience Needs

The requirements or expectations of the audience for which content or communication is designed, influencing how messages are crafted and delivered.