Question

The optimal level of debt in the presence of corporate taxes and bankruptcy costs occurs at the point at which the present value of distress costs Blank______ the present value of the tax shield benefits.

Multiple choice question.

minimizes


equals


maximizes

Answer 1

The optimal level of debt in the presence of corporate taxes and bankruptcy costs occurs at the point at which the present value of distress costs **equals** the present value of the tax shield benefits.

So the correct choice is **equals**.