Although the Value of an Additional Interest Tax Shield May

question 63

Multiple Choice

Although the value of an additional interest tax shield may be positive,firms may restrict borrowing if:

• A) the returns on the project are too high.
• B) their asset base is largely intangible.
• C) their asset beta is zero.
• D) the borrowing increases their WACC.

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Definitions:

Discrete Variables

Variables that assume a countable number of separate values, often representing categories or distinct groups.

Nominal

Refers to a type of variable that represents categories with no intrinsic order or ranking.

Ordinal

A scale of measurement where numbers represent ordered categories that have a meaningful sequence, but the intervals between the categories are not necessarily equal.

Ratio Scales

Ratio scales are a type of measurement scale that not only have order and equal intervals but also have a true zero point, allowing for the calculation of ratios.