Which of the Following Is a Safe Assumption for a Firm

question 34

Multiple Choice

Which of the following is a safe assumption for a firm in which the PV of the tax shield is approximately equal to the costs of financial distress?

• A) The tax shield has been calculated incorrectly.
• B) The firm is too heavily levered financially.
• C) The firm has reached its optimal debt level.
• D) The firm appears to have low risk of financial distress.

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Definitions:

Neocortex

The part of the brain involved in higher-order brain functions such as sensory perception, cognition, generation of motor commands, spatial reasoning, and conscious thought.

Levels-Of-Processing

A theory in cognitive psychology suggesting that deeper levels of analysis produce more enduring memory.

Memory

The ability of the mind to retain and recall information.

Frog

An amphibian creature with long hind legs for leaping, smooth skin, and typically lives both in water and on land.