Which One of the Following Statements Related to the Static

Multiple Choice

Which one of the following statements related to the static theory of capital structure is correct?

A) A firm begins to lose value as soon as the first dollar of debt is incurred.
B) The actual value of a firm continually rises in direct proportion to the increased use of debt.
C) The linear function of a firm's value has a constant positive slope.
D) A firm's value is maximized when a firm operates at its optimal debt level.
E) The value of a firm will automatically decrease whenever the debt-equity ratio is decreased.