When the basic MM theory is modified to allow for corporate taxes only (ie: MM with corporate taxes and ignoring imputation) the optimal capital structure is:

a.A trade-off between the tax subsidies of debt and bankruptcy costs, giving an optimal capital structure somewhere between 100% equity and 100% debt

b.100% debt because debt is cheaper due to the lower interest cost.

c.100% equity because firms do not have to pay dividends

d.100% debt because G = t_cD is positive and increases with the amount of debt.

e.There is no optimal capital structure.