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Which one of the following statements is correct? a)Because debt creates the tax shield, a firm's optimal capital structure is 100 percent debt. b)Equity become
Which one of the following statements is correct?
a)Because debt creates the tax shield, a firm's optimal capital structure is 100 percent debt. | ||
b)Equity become less risky when the degree of financial leverage increases because of the tax shield effect | ||
c)The risk of equity depends on both the degree of financial leverage and the riskiness of the firm's operations. | ||
d)WACC decreases as the debt-equity ratio increases. |
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