The MM Theory with Taxes Implies That Firms Should Issue

question 1

Multiple Choice

The MM theory with taxes implies that firms should issue maximum debt.In practice, this is not true because

• A)debt is more risky than equity.
• B)bankruptcy and its attendant costs are a disadvantage to debt.
• C)the payment of personal taxes may offset the tax benefit of debt.
• D)bankruptcy and its attendant costs are a disadvantage to debt, and the payment of personal taxes may offset the tax benefit of debt.

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Definitions:

Self-Serving Attributional Bias

The common tendency to attribute one’s successes to personal characteristics and failures to external factors.

Self-Handicapping

A strategy where individuals create obstacles for themselves to provide an excuse for potential failure, thereby protecting self-esteem.

God's Love

The unconditional and infinite love that God holds for His creations, as interpreted in various religious contexts.

Symbolic Self-Completion

A theory suggesting individuals strive to acquire and display symbols that are associated with their desired self-identity, especially when they feel incomplete in a certain role or aspect.