If a Firm Has the Optimal Amount of Debt, Then

question 14

Multiple Choice

If a firm has the optimal amount of debt, then the:

• A)direct financial distress costs must equal the present value of the interest tax shield.
• B)value of the levered firm will exceed the value of the firm if it were unlevered.
• C)value of the firm is minimized.
• D)value of the firm is equal to V_L + T_C * D.
• E)debt-equity ratio is equal to 1.0.

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Definitions:

Proposal

A plan or suggestion, especially a formal or written one, put forward for consideration or discussion by others.

AIDA Format

AIDA stands for Attention, Interest, Desire, and Action, which is a marketing model used to describe the stages a customer goes through in the process of purchasing a product.

Business Report

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