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funkiiee funkiiee
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8 months ago
Which statement concerning capital structure theory is correct?


▸

According to the trade-off theory, an increase in the costs of bankruptcy would lead firms to reduce the amount of debt in their capital structures.



▸

According to the trade-off theory, the optimal capital structure strikes a balance between the tax benefits of debt and the firm’s WACC.



▸

The pecking order hypothesis asserts that the presence of flotation costs or asymmetric information may cause a firm to raise different types of capital in a sequence that maximizes these costs. 



▸

The market timing theory suggests that managers issue equity when they believe that stock market prices are abnormally low and issue debt when they believe that interest rates are abnormally high. 

Textbook 
Financial Management: Theory and Practice

Financial Management: Theory and Practice


Edition: 4th
Authors:
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ftricey04ftricey04
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8 months ago
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funkiiee Author
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8 months ago
Thanks
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