When Firms Issue More Debt,the Tax Shield on Debt _____,The

question 9

Multiple Choice

When firms issue more debt,the tax shield on debt _____,the agency costs on debt (i.e.,costs of financial distress) _____,and the agency costs on equity _____.

• A) increases; increase; increase
• B) decreases; decrease; decrease
• C) increases; increase; decrease
• D) decreases; decrease; increase
• E) increases; decrease; decrease

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Definitions:

Documents Of Title

Legal documents that prove ownership of goods or property, such as bills of lading or warehouse receipts.

Consumer Goods

Products and commodities purchased by individuals for personal or household use.

Farm Products

Goods involved in farming operations, including crops, livestock, and products obtained from crops or animals (like milk or wool).

Financing Statement

A document filed to give public notice to third parties of a secured party's interest in the property of a debtor, typically used in securing transactions under the UCC.