Biology Forums - Study Force

Which of the following statements is FALSE?
A) The presence of financial distress costs can explain why firms choose debt levels that are too high to fully exploit the interest tax shield.
B) With higher costs of financial distress, it is optimal for the firm to choose lower leverage.
C) Differences in the magnitude of financial distress costs and the volatility of cash flows can explain the differences in the use of leverage across industries.
D) At the point D*, where VL is maximized, the tax savings that result from increasing leverage are just offset by the increased probability of incurring the costs of financial distress.

A