While debt can provide an interest tax shield to increase firm value, the average debt-to-value ratio is less than 50% in most developed countries. Which of the following is not one of the underlying reasons?

A high level of debt would lead to a bad reputation.

The uncertainty in EBIT reduces the optimal level of debt.

The amount of EBIT limits the maximum tax benefit of debt. Firms with relatively small EBITs cannot fully capture the tax benefit when the debt value is high.

When taking into account the personal income and dividend taxes, the benefit of debt can be much smaller than the expected benefit based on the corporate tax only.