The Static Theory of Capital Structure Advocates That the Optimal

question 72

Multiple Choice

The static theory of capital structure advocates that the optimal capital structure for a company:

• A) is highly dependent upon a constant debt-equity ratio over time.
• B) remains fixed over time.
• C) is independent of the company's tax rate.
• D) is independent of the company's debt-equity ratio.
• E) equates marginal tax savings from additional debt to the marginal increased bankruptcy costs of that debt.

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