The Static Theory of Capital Structure Advocates That the Optimal

Multiple Choice

The static theory of capital structure advocates that the optimal capital structure for a firm:

A) is dependent on a constant debt-equity ratio over time.
B) remains fixed over time.
C) is independent of the firm's tax rate.
D) is independent of the firm's weighted average cost of capital.
E) equates the tax savings from an additional dollar of debt to the increased bankruptcy costs related to that additional dollar of debt.