The Interest Tax Shield Is a Key Reason Why

question 42

Multiple Choice

The interest tax shield is a key reason why

• A)the value of an unlevered firm is equal to the value of a levered firm.
• B)the net cost of debt to a firm is generally less than the cost of equity.
• C)firms tend to minimize their borrowing.
• D)the cost of debt is equal to the cost of equity for a firm with a debt-to-equity ratio of 1.
• E)firms prefer equity financing over debt financing.

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Definitions:

Projective Tests

A type of personality test in which the individual's responses to ambiguous stimuli reveal hidden emotions and internal conflicts.

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questionnaires or surveys in which individuals provide information about themselves, often used to assess aspects of personality or psychological states.

Idealized Self-Image

A mental image of oneself that represents what they aspire to be, often more perfect or idealized than their actual self.

Based On Perfection

An approach or judgment that is derived from or aimed at achieving a flawless or ideal state.