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Which of the following statements is FALSE? The optimal proportion of debt in the firm's capital structure will be higher, the higher the firm's growth
Which of the following statements is FALSE? The optimal proportion of debt in the firm's capital structure will be higher, the higher the firm's growth rate. 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. So, a tax-optimal capital O structure does not include debt. From a tax perspective, the firm's optimal level of debt is proportional to its current earnings. No corporate tax benefit arises from incurring interest payments that regularly exceed EBIT. If there is uncertainty regarding EBIT, a higher interest expense increases the risk that interest will exceed EBIT
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