s. The interest tax shield is a key reason why: the required rate of return on assets rises when debt is added to the capital structure. B) the value of an unlevered company is less than the value of a levered company C) the value of an unlevered company is greater than the value of a levered company. D) the cost of debt is equal to the cost of equity for a levered company. E) companies prefer equity financing over debt financing. 6. Which one of the following provides the greatest tendency to increase the percentage of debt included in a company's optimal capital structure according to M&M Proposition I with taxes? A) Exceptionally high depreciation expenses B) Increase in marginal tax rate C) Substantial tax shields from other sources D) High probability of financial distress E) Minimal taxable income