Which One of the Following Is Correct Based on the Static

Multiple Choice

Which one of the following is correct based on the static theory of capital structure?

A) A firm receives the greatest benefit from debt financing when its tax rate is relatively low.
B) A debt-equity ratio of 1 is considered to be the optimal capital structure.
C) The costs of financial distress decrease the value of a firm.
D) The more debt a firm assumes, the greater the incentive to acquire even more debt until such time as the firm is financed with 100 percent debt.
E) At the optimal level of debt a firm also optimizes its tax shield on debt.