A3 Managers typically have more information than the average shareholder does, as per asymmetric information theory. Their reluctance to issue common stock because of the potential negative signals and high flotation costs are also widely accepted market facts. Therefore in situations requiring expansion of their companies capital structure, they prefer when ever possible to first (a) Issue new debt which is relatively costless for their firms. (b) use retained earnings rather than external finance sources. (c) forego development until there are roaring stock markets when it is easier to issue preferred stock. (d) target a mixed expansion of debt, equity and preferred stock. (e) do any of the above OD Cho