Smith Fernandez, the corporate controller for the Olympus Marathon Gas Corporation has been researching Modigliani and Miller$$s $($MM$)$ theories on capital structure. Smith would like to apply the theories to his firm$$s capital structure, but does not agree with MM$$s assumption of no taxes, since Olympus Marathon has a $25\%$ tax rate. If Smith removes the assumption of no taxes, but keeps all of MM$$s other assumptions, which of the following would be the optimal capital structure for maximizing the

Smith Fernandez, the corporate controller for the Olympus Marathon Gas Corporation has been researching Modigliani and Miller$$s $($MM$)$ theories on capital structure. Smith would like to apply the theories to his firm$$s capital structure, but does not agree with MM$$s assumption of no taxes, since Olympus Marathon has a $25\%$ tax rate. If Smith removes the assumption of no taxes, but keeps all of MM$$s other assumptions, which of the following would be the optimal capital structure for maximizing the

The capital structure Smith chooses is irrelevant.

$100\%$ equity.

$100\%$ debt.

$50\%$ equity band $50\%$ debt