With taxes, but in the absence of financial distress costs, the optimal capital structure would be...

Question

Question

With taxes, but in the absence of financial distress costs, the optimal capital structure would be...

With taxes, but in the absence of financial distress costs, the optimal capital structure would be

A.

100% debt.

B.

50% debt, 50% equity.

C.

100% equity.

D.

completely insensitive to the mix of debt and equity.

business finance

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Answer 1

Answer #1

MM I with corporate taxes says that the firm with the greater proportion of debt is more valuable because of the interest tax shield

A.

100% debt.

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Answer 2

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