All of the Following Statements Are Correct Except

question 94

Multiple Choice

All of the following statements are correct except:

• A) The tax deductibility of debt becomes more important to firms with large non-debt tax shields such as foreign tax credits granted by the U.S. government to firms that pay taxes to foreign governments.
• B) As the debt/total asset ratio rises, or as earnings become more volatile, the firm will face higher borrowing costs, driven upward by bond investors requiring higher yields to compensate for additional risk.
• C) The static tradeoff hypothesis states that firms will balance the advantages of debt (its lower cost and tax-deductibility of interest) with its disadvantages (greater possibility of bankruptcy and the value of explicit and implicit bankruptcy costs).
• D) Agency costs reduce the optimal level of debt financing for a firm below the level that would be appropriate if agency costs were zero.

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Definitions:

Test Statistic

A value computed from sample data that is used in a hypothesis test to determine whether to reject the null hypothesis.

T Represent

T represent, likely a mistype for "T value", is a statistical measure that indicates the standard deviation difference between two sample means, commonly used in t-tests.

Obtained Value

The actual value resulting from a statistical test, which is compared against a critical value to determine significance.

T Represent

In statistics, "T" often stands for the t-statistic, used in t-tests to compare the means of two groups.