The Interest Tax Shield Is a Key Reason Why

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.