The managerial implications of capital structure theory include all of the following except:
A)capital structure changes transmit important information to investors
B)changes in capital structure result in changes in the market value of the firm's equity
C)optimal capital structure is influenced heavily by the business risk facing the firm
D)tax shield benefits from equity lead to increased firm value

Question

Quizplus · Accepted Answer

The other three options are all valid managerial implications of capital structure theory, but tax shield benefits from equity actually result in decreased firm value due to the cost of issuing and servicing the additional equity.

The Managerial Implications of Capital Structure Theory Include All of the Following