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

---

Definitions:

Discriminative Response

A behavioral response that differentiates between various stimuli, showing an ability to discern or discriminate between them.

Conditioned Response

A learned response to a previously neutral stimulus that has become conditioned through association.

Cat Food

Manufactured food specifically formulated to meet the nutritional needs of domestic cats.

Classical Conditioning

A conditioning method where a response initially triggered by a second stimulus comes to be elicited by the first stimulus alone after repeated pairings of the two stimuli.