Which one of the following factors would likely cause a firm to increase its use of debt financing as measured by the debt-to-total-capital ratio?

A. Increased economic uncertainty.

C. An increase in the price-earnings ratio.

D. An increase in the corporate income tax rate.

Which one of the following factors would likely cause a firm to increase its use of debt financing as measured by the debt-to-total-capital ratio? An increase in the corporate income tax rate. ( Modigliani–Miller theorem)

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The correct Answer is D: An increase in the corporate income tax rate

D.---------

An increase in the corporate income tax rate.

An increase in the operating leverage