Ignore Financial Distress Costs

question 53

Multiple Choice

Ignore financial distress costs.When [(1 − T_C) × (1 − T_S) = (1 − T_B) ],then firms:

• A)should be all-equity financed.
• B)need to maintain a debt-equity ratio of .5.
• C)tend to be indifferent between issuing debt or issuing equity.
• D)discover that both dividends and interest payments are non-deductible business expenses.
• E)can reduce their taxes by increasing their dividend payouts.

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Definitions:

Affective Disorder

A type of psychological disorder that involves mood disturbances, such as depression or bipolar disorder.

Allostatic Load

The physiological wear and tear on the body that results from ongoing adaptive efforts to maintain stability (homeostasis) in response to stressors.

Present Experience

The immediate perception of events happening at the current moment, involving a focus on the here and now.

Mindfulness

Paying attention on purpose in the present moment with attitudes of curiosity, patience, nonjudgement and openness.