The Inexpensive Nature of Long-Term Debt in a Firm's Capital

question 122

Multiple Choice

The inexpensive nature of long-term debt in a firm's capital structure is due to the fact that ________.

• A) the equity holders are the true owners of the firm
• B) equity capital has a fixed return
• C) interest payments are tax-deductible
• D) equity holders have a higher position in the priority of claims

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Definitions:

Strict Liability

Legal responsibility placed on an individual for the results of his actions irrespective of whether he was culpable or at fault.

Breached A Duty

Occurs when an individual or entity fails to fulfill their obligations or duties as required by law or contract.

Plaintiff

An individual or party who initiates a lawsuit or legal action against another party in a court of law.

Ultrahazardous Activity

An activity that poses an inherent risk of serious harm to people or property, even when utmost care is exercised to prevent harm.