If the Present Value of the Tax Shield Equals the Present

question 64

Multiple Choice

If the present value of the tax shield equals the present value of the costs of financial distress, then the:

• A)Firm is using the optimal level of debt
• B)Firm is paying too high an interest rate
• C)Firm's market value equals the value of the unlevered firm
• D)Firm should increase its use of debt

---

Definitions:

Epiphyseal Plate

A growth plate located at the ends of long bones where new bone tissue is produced during childhood and adolescence.

Zone of Resting Cartilage

A region in the epiphyseal plate of growing bones where chondrocytes are not actively proliferating but can be recruited for growth.

Zone of Calcification

A region in growing bones where cartilage cells die and are replaced by bone cells, part of bone growth and development.

Zone of Hypertrophy

A region in growing bone where cartilage cells enlarge and mature, playing a critical role in bone elongation.