If a Firm Uses Less Debt in Its Capital Structure

question 59

Multiple Choice

If a firm uses less debt in its capital structure than is optimal, then

• A)its investors will pay more in personal income taxes than is necessary.
• B)the firm will pay more in corporate income taxes than is necessary.
• C)there will be less free cash flow for managers to invest in positive NPV projects.
• D)all of the above.

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Definitions:

ANOVA Table

A tabular representation used in analysis of variance to summarize the sources of variation between groups and within groups.

Population Standard Deviation

A measure of the dispersion or variability within a population data set, quantifying how much individuals within this population differ from the population mean.

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The amount of money required to purchase residential properties, which can vary widely based on location, size, condition, and market trends.

Subdivisions

Sections or segments into which a larger area, population, or structure is divided, often used in urban planning, demographic studies, and experimental designs.