Keeping in mindthat increasing the value of a firm is the goal of financialmanagement, the trade-off theory shows that:
Selectone:
- The corporate leverage decision involves a trade-off between thetax benefits of debt and the costs of financialdistress
- There is an optimal amount of debt for any individualfirm
- As more and more debt is added, the present value of the financialdistress costs rises at a higher rate than the present value of thetax shield
- All of the above