When bankruptcy is added to the M&M world of capital structure, which of the following statements is true as more debt is added to the financing mix of the company?
A) The interest tax shield is a benefit to equity holders, although they bear increasing risk.
B) The advantage of the tax shield starts to be offset by financial distress costs.
C) The WACC of the company starts to increase past a certain level of debt.
D) All of the above
Answer: D
Business
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