The Interest Tax Shield Has No Value for a Firm

question 14

Multiple Choice

The interest tax shield has no value for a firm when:
I. the tax rate is equal to zero.
II. the debt-equity ratio is exactly equal to 1.
III. the firm is unlevered.
IV. a firm elects 100% equity as its capital structure.

• A) I and III only
• B) II and IV only
• C) I, III, and IV only
• D) II, III, and IV only
• E) I, II, and IV only

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Definitions:

Connective

A word or phrase in logic that connects propositions, such as "and", "or", "if...then", serving to create compound statements.

Symbolic Form

An abstract representation of logic statements using symbols to represent logical operations and relationships.

Components

The individual parts or elements that make up a complex system, machine, or device.

Connective

In logic and philosophy, a term or operation that links propositions together in compound sentences, such as "and", "or", and "not".