The Optimal Capital Structure Depends on ________ Such as Taxes

question 28

Multiple Choice

The optimal capital structure depends on ________ such as taxes, distress costs and agency costs.

• A) capital market factors
• B) market imperfections
• C) firm specific risks
• D) systematic risks

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Definitions:

Noncash Assets

Assets that cannot be quickly converted to cash, including property, plant, and equipment, and often valued at cost or depreciated cost on the balance sheet.

Liquidation Expenses

Costs incurred during the process of selling off assets or winding up a business, including legal fees, auctioneer fees, and other related expenses.

Cash Distribution

The payment of earnings or capital to shareholders, partners, or members from a corporation, partnership, or other entity, typically in the form of cash.

Noncash Assets

Assets that are not in the form of cash or cash equivalents, including physical property, intellectual property, and investments.