Which One of These Relationships Will Exist If a Firm

question 33

Multiple Choice

Which one of these relationships will exist if a firm is operating under its optimal capital structure?

• A)The net present value of the firm will equal zero.
• B)The firm's cost of capital will equal the risk-free rate.
• C)The present value of the financial distress costs will equal the present value of the tax shield on debt.
• D)The value of the firm equal the maximum value obtainable according to the MM theories.
• E)The firm will be financed with equal amounts of long-term debt and equity.