Managers seeking an optimal capital structure face a trade-off between saving benefits from increased _______ and increasing risk.

A) Tax; Equity
B) Tax; Debt
C) Tax; Market Value
D) Tax; Assets

Question

Managers seeking an optimal capital structure face a trade-off between ______________ saving benefits from increased _____________________ and increasing risk.

A) Tax; Equity
B) Tax; Debt
C) Tax; Market Value
D) Tax; Assets

reana peters · Accepted Answer

Final Answer : B, Explanation :  Managers seeking an optimal capital structure have to consider the trade-off between tax-saving benefits from increased debt and increasing risk. While increasing debt can lead to tax shields and lower cost of capital, too much debt can increase the risk of financial distress and bankruptcy. Therefore, a balance needs to be struck to find the optimal capital structure that maximizes tax benefits while minimizing risk. In this case, option B is the best choice because it explicitly mentions the trade-off between tax and debt.

Managers seeking an optimal capital structure face a trade-off between saving benefits from increased _______ and increasing risk.

A) Tax; Equity
B) Tax; Debt
C) Tax; Market Value
D) Tax; Assets

Definitions

Learning Objectives

Learning Objectives

Related questions

Managers seeking an optimal capital structure face a trade-off between ______________ saving benefits from increased _____________________ and increasing risk. ​ ​A) Tax; Equity​B) Tax; Debt​C) Tax; Market Value​D) Tax; Assets​

Definitions

Learning Objectives

Learning Objectives

Related questions

Managers seeking an optimal capital structure face a trade-off between saving benefits from increased _______ and increasing risk.

A) Tax; Equity
B) Tax; Debt
C) Tax; Market Value
D) Tax; Assets