In a World with Corporate Taxes but No Possibility of Financial

question 117

Multiple Choice

In a world with corporate taxes but no possibility of financial distress, the value of the firm is maximized when the:

• A)Firm uses no debt in its capital structure
• B)Firm uses no equity in its capital structure
• C)Firm uses a debt-equity ratio of 1.0
• D)Corporate tax rate approaches 100%

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