Which One of the Following Statements Related to the Static

Multiple Choice

Which one of the following statements related to the static theory of capital structure is correct?

A) The linear function of a firm's value has a constant positive slope.
B) The value of a firm will automatically decrease whenever the debt-equity ratio is decreased.
C) The actual value of a firm continually rises in direct proportion to the increased use of debt.
D) A firm begins to lose value as soon as the first dollar of debt is incurred.
E) A firm's value is maximised when a firm operates at its optimal debt level.