The Interest Tax Shield Is a Key Reason Why

question 35

Multiple Choice

The interest tax shield is a key reason why:

• A)the required rate of return on assets rises when debt is added to the capital structure.
• B)the value of an unlevered firm is equal to the value of a levered firm.
• C)the net cost of debt to a firm is generally less than the cost of equity.
• D)the cost of debt is equal to the cost of equity for a levered firm.
• E)firms prefer equity financing over debt financing.

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Definitions:

Cooperation

The action or process of working together to the same end, involving mutual assistance in working toward a common goal.

Teamwork

The collaborative effort of a group to achieve a common goal or to complete a task in the most effective and efficient way.

High Self-monitor

Individuals who are highly attentive to social cues and adjust their behavior accordingly in social situations.

Leadership Style

The characteristic approach and manner in which a leader directs, motivates, guides, and manages their team or organization.