corporate taxes and financial distress costs. The optimal capital structure theory llistrates that 026. Consider both corporate taxes and financial distress costs. The optimal capital structure theory illustrates that O a firm's value and its weighted average cost of capital are inversely related. O a firm's value and its tax rate are inversely related. the maximum value of a firm is obtained when a firm is financed solely with debt. Othe value of a firm rises as both the interest rate on debt and the tax rate rise