The Capital Structure Chosen by a Firm Doesn't Really Matter

question 55

Multiple Choice

The capital structure chosen by a firm doesn't really matter because of:

• A)taxes.
• B)the interest tax shield.
• C)the relationship between dividends and earnings per share.
• D)the effects of leverage on the cost of equity.
• E)homemade leverage.

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Definitions:

Balancing Act

The process of attempting to maintain equilibrium or optimal performance in face of conflicting interests or demands.

Chaos

A state of extreme confusion and disorder, marked by a lack of predictability and control, often referenced in the context of systems, science, and societal conditions.

Federal Statute

A law passed by the United States Congress and signed by the President.

Preemption

The process by which the courts decide that a federal statute must take precedence over a state statute.