Which of the Following Statements Is False

question 91

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 the level such that 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:

Logical Thinking

The process of reasoning consistently and rationally, applying systematic steps and principles in problem-solving and decision-making.

Living

The state of being alive and capable of growth, reproduction, function, and continual change preceding death.

Dualistic Thinking

The tendency to categorize aspects of life into binaries or opposites, often viewing them as completely separate and distinct.

Relativistic Thinking

is the ability to understand that knowledge and truth may vary across different contexts and perspectives, recognizing multiple viewpoints.