In a World with Taxes and Financial Distress,when a Firm

Multiple Choice

In a world with taxes and financial distress,when a firm is operating with the optimal capital structure: I. the debt-equity ratio will also be optimal.
II) the weighted average cost of capital will be at its minimal point.
III) the required return on assets will be at its maximum point.
IV) the increased benefit from additional debt is equal to the increased bankruptcy costs of that debt.

A) I and IV only
B) II and III only
C) I and II only
D) II, III, and IV only
E) I, II, and IV only