The Static Theory of Capital Structure Advocates That the Optimal

question 34

Multiple Choice

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

• A)is dependent on a constant debt-equity ratio over time.
• B)remains fixed over time.
• C)is independent of the firm's tax rate.
• D)is independent of the firm's weighted average cost of capital.
• E)equates the tax savings from an additional dollar of debt to the increased bankruptcy costs related to that additional dollar of debt.

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