The Interest Tax Shield Is a Key Reason Why

question 88

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 company is equal to the value of a levered company.
• C) the net cost of debt is generally less than the cost of equity.
• D) the cost of debt is equal to the cost of equity for a levered company.
• E) companies prefer equity financing over debt financing.

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