Which one of these relationships will exist if a firm is operating under its optimal capital structure?

Multiple Choice

The firm will be financed with equal amounts of long-term debt and equity.

The value of the firm will equal the maximum value obtainable according to the MM theories.

The firm's cost of capital will equal the risk-free rate.

The net present value of the firm will equal zero.

The present value of the financial distress costs will equal the present value of the tax shield on debt.