In a World with No Taxes and No Bankruptcy Costs

question 1

Multiple Choice

In a world with no taxes and no bankruptcy costs,

• A) the firm's value is unaffected by capital structure.
• B) the firm should maximize the value of the firm by maximizing the firm's debt.
• C) the firm should borrow to the point where the marginal benefits of debt equal the marginal costs.
• D) the firm cannot make a decision about the optimal capital structure with the existing information.

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Definitions:

Jonah Complex

The fear of success or the avoidance of one's own potential greatness.

Maslow

Refers to Abraham Maslow, a psychologist best known for creating Maslow's hierarchy of needs, a theory in psychology regarding human motivational levels.

Self-actualize

The process by which individuals realize their fullest potential, achieving personal goals and self-fulfillment.

Personality

A combination of characteristics or qualities that form an individual's distinctive character.