Which One of the Following Statements Related to the Static

question 62

Multiple Choice

Which one of the following statements related to the static theory of capital structure is correct?

• A)A firm begins to lose value as soon as the first dollar of debt is incurred.
• B)The actual value of a firm continually rises in direct proportion to the increased use of debt.
• C)The linear function of a firm's value has a constant positive slope.
• D)A firm's value is maximized when a firm operates at its optimal debt level.
• E)The value of a firm will automatically decrease whenever the debt-equity ratio is decreased.

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Definitions:

Physical

Relating to the body as opposed to the mind, or relating to material things.

Social

Relating to society or its organization, emphasizing the interaction and relationships of individuals within a community.

Psychiatrist

A medical doctor specialized in diagnosing, preventing, and treating mental illnesses.

Mind

The aspect of intellect and consciousness experienced as combinations of thought, perception, memory, emotion, will, and imagination, including all unconscious cognitive processes.