30. According to the static theory of capital structure, the optimal capital structure for a company:

A. remains fixed over time.

B. equates marginal tax savings from additional debt to the marginal increased bankruptcy costs of that debt.

C. is independent of the company's tax rate.

D. is independent of the company's debt-equity ratio.

E. is highly dependent upon a constant debt-equity ratio over time.

M&M Proposition I with taxes is based on the concept that:

A. the value of a taxable company increases as the level of debt increases.

B. WACC is unaffected by a change in the company's capital structure.

C. capital structure is irrelevant because investors and companies have differing tax rates.

D. the cost of equity increases as the debt-equity ratio increases.

E. the optimal capital structure is the one that is totally financed with equity.

7. Which one of the following related to stock repurchases is correct?

A. All stock repurchases must be identifies as such to the selling party.

B. U.S. industrial firms have increased their stock repurchases every year for each of the past 20 years.

C. A tender offer indicates that a company is willing and able to purchase as many shares as shareholders with to sell.

D. The tax law change in May 2003 led to a huge increase in stock repurchases and a reduction in dividend payments.

E. Stock repurchases can be a relatively tax-efficient method of distributing cash to shareholders.