In Case III (with taxes and bankruptcy risk), which is correct? The interest tax shield continuously rises in debt The optimal D/E ratio is somewhere between all equity and all debt. The value of the firm continuously rises in debt O The WACC of the firm continuously declines in debt. A for-profit firm that is unable to make its debt obligations can go to the court and ask protection from its creditors, but still continue to operate. This is known as: A Chapter 7 Bankruptcy O A Chapter 11 Bankruptcy An informal workout A Chapter 9 Bankruptcy