According to the MM Model of Capital Structure, the Present

question 194

Multiple Choice

According to the MM model of capital structure, the present value of the tax shield is offset by potential ____, resulting in an optimal capital structure.

• A)bankruptcy costs
• B)interest expense
• C)operating costs
• D)a and b

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Definitions:

Skimming Strategy

A pricing strategy where a company sets relatively high prices at the launch of a new product to maximize profits from customers willing to pay a premium.

Bundle Packaging

The practice of selling multiple products or services together as a single package deal.

Demand-Oriented

A pricing strategy where price is set based on consumer demand, with higher prices when demand exceeds supply and lower prices when demand is low.

Customary Pricing

A pricing strategy where the price is set based on what is traditionally expected or accepted by the market for a product or service.