In thinking about theories of capital structure, which of the following statements is INCORRECT? A. In...
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In thinking about theories of capital structure, which of the following statements is INCORRECT? A. In the case of no corporate taxes or bankruptcy costs, Modigliani & Miller suggest that capital structure can neither lower weighted average cost of capital nor increase firm value. B. The pecking order theory suggests that there is a particular optimal capital structure, which involves minimal debt and no outside equity. C. The pecking order theory suggests that equity and debt issuance may send unintended signals to the market, which may negatively affect firm value. D. Static theory suggests that there is an optimal capital structure, based on the tradeoff between the tax advantages of debt and increased bankruptcy costs. In thinking about theories of capital structure, which of the following statements is INCORRECT? A. In the case of no corporate taxes or bankruptcy costs, Modigliani & Miller suggest that capital structure can neither lower weighted average cost of capital nor increase firm value. B. The pecking order theory suggests that there is a particular optimal capital structure, which involves minimal debt and no outside equity. C. The pecking order theory suggests that equity and debt issuance may send unintended signals to the market, which may negatively affect firm value. D. Static theory suggests that there is an optimal capital structure, based on the tradeoff between the tax advantages of debt and increased bankruptcy costs.
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Related Book For
Business Law Text and Cases
ISBN: 978-0324655223
11th Edition
Authors: Kenneth W. Clarkson, Roger LeRoy Miller, Gaylord A. Jentz, F
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