If a Company Has the Optimal Amount of Debt, Then

question 68

Multiple Choice

If a company has the optimal amount of debt, then the:

• A) direct financial distress costs must equal the present value of the interest tax shield.
• B) value of the levered company will exceed the value of the unlevered company.
• C) company has no financial distress costs.
• D) Value of the firm is equal to VL + TCD.
• E) debt-equity ratio is equal to 1.

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Definitions:

Gas Exchange

The process of exchanging oxygen and carbon dioxide between an organism and its environment, fundamental for respiration in living beings.

Larynx

The voice box located in the throat responsible for vocalization, breathing, and protecting the trachea against food aspiration.

Inhaled Dirt

Microscopic particles from the environment that are drawn into the respiratory system during breathing.

Bacteria

Microorganisms that are single-celled and can exist either as independent organisms or as parasites.