Which One of These Relationships Will Exist If a Firm

Multiple Choice

Which one of these relationships will exist if a firm is operating under its optimal capital structure?

A) The net present value of the firm will equal zero.
B) The firm's cost of capital will equal the risk-free rate.
C) The present value of the financial distress costs will equal the present value of the tax shield on debt.
D) The value of the firm will equal the maximum value obtainable according to the MM theories.
E) The firm will be financed with equal amounts of long-term debt and equity.