Multiple Choice
Which of the following is true when a firm has level coupon debt outstanding and growth opportunities?
A) The firm should be 100% debt financed because the greater the debt the greater tax shield.
B) 100% debt financing is suboptimal because increased firm value does not increase the current interest needed to shield income today.
C) Firm value will only increase if the debt level is increased to 100%.
D) The high growth firm will have high debt ratios as they need greater financing.
Correct Answer:
Verified
Correct Answer:
Verified
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