The Optimal Capital Structure Will Tend to Include More Debt

question 25

Multiple Choice

The optimal capital structure will tend to include more debt for firms with:

• A)the highest depreciation deductions.
• B)the lowest marginal tax rate.
• C)substantial tax shields from other sources.
• D)lower probability of financial distress.
• E)less taxable income.

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Definitions:

Zygomaticus

The zygomaticus refers to two facial muscles, the zygomaticus major and minor, which extend from the cheekbone to the corners of the mouth and are responsible for raising the upper lip, contributing to facial expressions such as smiling.

Sternocleidomastoid

A significant muscle in the neck that is involved in the rotation and flexion of the head.

Tibialis Anterior

A muscle in the lower leg that is involved in dorsiflexion and inversion of the foot.

Biceps Femoris

A muscle of the posterior thigh involved in knee flexion and hip extension, part of the hamstrings group.