The MM Theory with Taxes Implies That Firms Should Issue

Multiple Choice

The MM theory with taxes implies that firms should issue maximum debt.In practice,this does not occur because:

A) debt is more risky than equity.
B) bankruptcy is a disadvantage to debt.
C) the weighted average cost of capital is inversely related to the debt-equity ratio.
D) the weighted average cost of capital is directly related to the debt-equity ratio.
E) U.S.regulations require the debt-equity ratio of publicly-traded firms to be in the range of .3 to .7.