In a World with Corporate and Personal Taxes, and No

Multiple Choice

In a world with corporate and personal taxes, and no bankruptcy costs,

A) a firm's value is unaffected by capital structure.
B) a firm should maximize its value by maximizing its debt.
C) a firm should borrow to the point where the marginal benefits of debt equal the marginal costs.
D) there are usually gains to the firm value associated with the use of debt, however the gains are not as large as those predicted by M&M's corporate tax model.