According to the static theory, the optimal level of debt Blank______ the WACC.Multiple choice question.minimizesequalsmaximizes

The optimal level of debt in the presence of corporate taxes and bankruptcy costs occurs at the point at which the present value of distress costs Blank______ the present value of the tax shield benefits.Multiple choice question.minimizesequalsmaximizes

The WACC is the weighted average cost of Blank______ plus the weighted average cost of Blank______.Multiple choice question.debt; equitycapital; fundslong-term debt; short-term debtcommon stock; equity

Under MM Proposition II with no taxes, the WACC is invariant to the debt-equity ratio because Blank______.Multiple choice question.the return on assets (RO) is lowerthe return on debt (RD) remains constantthe return on debt (RD) declinesthe return on assets (RO) is unchanged

After the issuance of debt, an unlevered firm becomes Blank______.Multiple choice question.unstablemore vibrantleveredstratified

The weighted average cost of capital rises at higher levels of debt owing to Blank______.Multiple choice question.financial distress costshigher dividend costshigher working capitalexcess free cash flow