The Capital Structure That Maximizes the Value of a Firm

question 31

Multiple Choice

The capital structure that maximizes the value of a firm also:

• A)minimizes financial distress costs.
• B)minimizes the cost of capital.
• C)maximizes the present value of the tax shield on debt.
• D)maximizes the value of the debt.
• E)maximizes the value of the unlevered firm.

---

Definitions:

Standard Normal Probability Distribution

A normal distribution with a mean of 0 and a standard deviation of 1, used in statistical analysis to represent standardized values of a dataset.

Probability Density Function

A function that describes the likelihood of a random variable to take on a particular value.

Continuous Random Variable

A variable whose value is not fixed and can assume an infinite number of values within a given range.

Normal Probability Distribution

A bell-shaped distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.