The Static Theory of Capital Structure Advocates That the Optimal

Multiple Choice

The static theory of capital structure advocates that the optimal capital structure for a company:

A) is highly dependent upon a constant debt-equity ratio over time.
B) remains fixed over time.
C) is independent of the company's tax rate.
D) is independent of the company's debt-equity ratio.
E) equates marginal tax savings from additional debt to the marginal increased bankruptcy costs of that debt.