The MM Theory with Taxes Implies That Firms Should Issue

question 46

Multiple Choice

The MM theory with taxes implies that firms should issue maximum debt.In practice, this is not true because:

• A)debt is more risky than equity.
• B)bankruptcy is a disadvantage to debt.
• C)firms will incur large agency costs of short term debt by issuing long term debt.
• D)Both A and B.
• E)Both B and C.

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Definitions:

Pitch

The perception of the frequency of sound, determining how high or low a tone sounds.

Intensity

The degree of strength, force, or energy with which an emotion, action, or quality is expressed or felt.

Facial Expression

The movement of muscles in the face to convey emotions, reactions, or social information.

Posture

The way in which an individual holds or positions their body, which can convey attitudes, feelings, and intentions.