The Interest Tax Shield Has No Value for a Firm

question 14

Multiple Choice

The interest tax shield has no value for a firm when:
I. the tax rate is equal to zero.
II. the debt-equity ratio is exactly equal to 1.
III. the firm is unlevered.
IV. a firm elects 100% equity as its capital structure.

• A) I and III only
• B) II and IV only
• C) I, III, and IV only
• D) II, III, and IV only
• E) I, II, and IV only

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Definitions:

Experimenter

An individual who conducts the experiment, controlling the manipulation of independent variables and observation of their effects on the dependent variables.

Reporting Results

The process of communicating the outcomes of a study or research, including findings, interpretations, and implications.

Stakeholders

Individuals or groups that have an interest or stake in the outcome of a project, decision, or endeavor.

Interpretation

The process of explaining or understanding the meaning of data, actions, words, or events, often requiring a subjective perspective that depends on context.