If the Present Value of the Tax Shield Equals the Present

question 86

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.

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