Which of the Following Statements Is False

question 57

Multiple Choice

Which of the following statements is false?

• A) A biotech firm might be developing drugs with tremendous potential, but it has yet to receive any revenue from these drugs. Such a firm will not have taxable earnings. In that case, a tax-optimal capital structure does not include debt.
• B) No corporate tax benefit arises from incurring interest payments that regularly exceed EBIT.
• C) The optimal level of leverage from a tax-saving perspective is a level where interest equals EBIT.
• D) In general, as a firm's interest expense approaches its expected taxable earnings, the marginal tax advantage of debt increases, limiting the amount of equity the firm should use.

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Definitions:

Photosystems

Cellular structures in chloroplasts where light energy is converted into chemical energy during photosynthesis.

Pigment

Substances that impart color to materials or organisms; in biological contexts, they absorb certain wavelengths of light and reflect others, visible to the human eye as color.

Chlorophyll

A green pigment found in the chloroplasts of plants, algae, and some bacteria, essential for photosynthesis.