The capital structure theory indicates

Assignment Help Financial Management

Reference no: EM13938011

Assume a company does pay corporate income taxes and had debt in its capital structure. The capital structure theory indicates that:

a. the maximum firm value and the minimum weighted average cost of capital occur at when equal amounts of equity and debt are used to raise long-term funds.

b. the value of a firm and the firm's weighted average cost of capital are unrelated.

c. the maximum firm value occurs at the point where the weighted average cost of capital is minimized.

d. the maximum firm value occurs when the weighted average cost of capital is less than optimal.

e. the weighted average cost of capital for a firm declines as long as the debt-equity ratio increases.

Reference no: EM13938011

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