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Which of the following statements is false? 1. A biotech firm might be developing drugs with tremendous potential, but it has yet to receive any
Which of the following statements is false? 1. A biotech firm might be developing drugs with tremendous potential, but it has yet to receive any revenue from these drugs. Such a firm will not have taxable earnings. In that case, a tax-optimal capital structure does not include debt. 2. No corporate tax benefit arises from incurring interest payments that regularly exceed EBIT. 3. The optimal level of leverage from a tax-saving perspective is the level such that interest equals EBIT. 4. In general, as a firm's interest expense approaches its expected taxable earnings, the marginal tax advantage of debt increases, limiting the amount of equity the firm should use
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