Other Things Held Constant, Which of the Following Events Is

question 6

Multiple Choice

Other things held constant, which of the following events is most likely to encourage a firm to increase the amount of debt in its capital structure?

• A) the costs that would be incurred in the event of bankruptcy increase.
• B) management believes that the firm's stock has become overvalued.
• C) its degree of operating leverage increases.
• D) the corporate tax rate increases.
• E) its sales become less stable over time.

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