In Analyzing the Value of the Firm as a Function

question 60

Multiple Choice

In analyzing the value of the firm as a function of capital structure, the present value of the tax shield benefit is offset by the present value of the expected , resulting in an interior optimal capital structure.

• A)financial distress costs
• B)agency costs
• C)holding costs
• D)financial distress costs and agency costs

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Definitions:

Accounts Receivable

Money owed to a business by its clients or customers for goods or services delivered or used but not yet paid for.

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance based on the accounting equation; assets and expenses normally have a debit balance, while liabilities, equity, and revenue normally have a credit balance.

Withdrawals

Money taken out from a bank account, or the act of taking out funds or assets from a business by the owner for personal use.

Assets

Resources owned or controlled by a business, expected to bring future economic benefits.