38. Given real-world type assumptions (e.g, including taxes and cost of bankruptcy). which one of the following factors causes a firm's optimal capital structure to be less than 100% debt? A. A firm receives the greatest benefit from debt financing when its tax rate is relatively low B. A debt-equity ratio of 1 is considered to be the optimal capital structure. C. As financial leverage increases, at some point the expected costs of financial distress increases. D. The more debt a firm assumes, the greater the incentive to acquire even more debt. E. At the optimal level of debt a firm also maximizes its tax shield on debt. 39. Which one of the following is the additional equity risk factor that arises as a consequence of a firm deciding to use some debt in its capital structure rather than be all equity financed? A. Strategic risk B. Financial risk C. Liquidity risk D. Industry risk E. Business risk 40. Griswold Motels has filed a petition for bankruptcy but hopes to continue its operations both during and after the bankruptcy process Which one of the following terms best applies to this situation? A. Chapter 7 bankruptcy B. Liquidation C. Technical insolvency E. Chapter 11 reorganization