Assume Both Corporate Taxes and Financial Distress Costs Apply to a Firm.Given

Multiple Choice

Assume both corporate taxes and financial distress costs apply to a firm.Given this,the static theory of capital structure illustrates that:

A) the value of a firm rises as both the interest rate on debt and the tax rate rise
B) the maximum value of a firm is obtained when a firm is financed solely with debt
C) the value of a firm rises as the interest rate on debt rises
D) a firm's value and its tax rate are inversely related
E) a firm's value and its weighted average cost of capital are inversely related