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.

---

Definitions:

TIN

Taxpayer Identification Number; a unique identifier assigned by the Internal Revenue Service or Social Security Administration to track taxpayers and accounts.

W-9 Forms

A request for taxpayer identification number and certification, used in the United States to provide information to entities that pay you income.

Penalty

A fine or charge levied by the IRS for failure to comply with tax laws, such as late filing or underpayment of taxes.

Federal Tax Withholding

The portion of an employee's wages removed by the employer and sent directly to the government as partial payment of income tax.