Which of the Following Is True of the Capital Structure

question 24

Multiple Choice

Which of the following is true of the capital structure of a company from a tax standpoint?

• A) In countries where there are no taxes, corporations are inclined to use debt.
• B) In countries where capital gains are taxed, investors should show preference for debt.
• C) In countries where capital gains are not taxed, equity capital costs should be high.
• D) In countries where dividends are not taxed, the investors should show preference for debt.
• E) In countries where capital gains are not taxed, investors should show preference for stocks.

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Definitions:

Cost Leadership

A strategy where a company aims to become the lowest cost producer in the industry to gain a competitive advantage.

Singularity

A hypothetical future point at which technological growth becomes uncontrollable and irreversible, resulting in unforeseeable changes to human civilization.

Long-Term Success

Achieving a consistent level of goal attainment and positive outcomes over an extended period.

Perceived Benefits

The advantages or improvements believed to be associated with a product or service from the consumer's perspective.