When Firms Issue More Debt, the Tax Shield on Debt

Multiple Choice

When firms issue more debt, the tax shield on debt ____, the agency costs on debt (i.e., costs of financial distress) ____, and the agency costs on equity ____.

A) increases; increases; increases
B) decreases; decreases; decreases
C) increases; increases; decreases
D) decreases; decreases; increases
E) increases; decreases; decreases