Which of the Following Statements Is FALSE

question 66

Multiple Choice

Which of the following statements is FALSE?

• A)A biotech firm might be developing drugs with tremendous potential,but it has yet to receive any revenue from these drugs.Such a firm will not have taxable earnings.In that case,a tax-optimal capital structure does not include debt.
• B)No corporate tax benefit arises from incurring interest payments that regularly exceed EBIT.
• C)The optimal level of leverage from a tax saving perspective is the level such that interest equals EBIT.
• D)In general,as a firm's interest expense approaches its expected taxable earnings,the marginal tax advantage of debt increases,limiting the amount of equity the firm should use.

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Definitions:

Frontal Lobes

The frontal lobes are part of the cerebral cortex and are involved in executive functions, such as decision-making, problem-solving, control of purposeful behaviors, consciousness, and emotions.

Toxic Effect

Harmful or detrimental impacts on an organism’s health or biological functions due to exposure to toxic substances or environments.

Neuron

Specialized nerve cell engaged in information processing.

Calcium

A chemical element and essential mineral in the body, vital for bone health, muscle function, and nerve signaling.