The Interest Tax Shield Has No Value for a Firm

question 10

Multiple Choice

The interest tax shield has no value for a firm when the
I.tax rate is equal to zero.
II.debt-equity ratio is exactly equal to 1.
III.firm is unlevered.
IV.firm elects an all-equity 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:

Trust Funds

A financial arrangement where assets are held and managed by one party for the benefit of another.

Personal Assets

Assets owned by an individual, including but not limited to, real estate, bank accounts, investments, and personal property.

Capital Contributions

Investments or funding provided by owners or shareholders to a business, typically in the form of cash or assets, in exchange for an ownership stake.

Management

The process of directing and controlling resources and activities to achieve specific goals.