Document Table Design Layout A. Normal Heading 1 19. Which of the following is NOT an implication of the pecking order theory of capital structure? A On average, a firm's stock price drops when it announces an equity issue. B. Firms may want to maintain a reserve of cash or unused borrowing capacity. C. More-profitable firms (all else equal) should have higher debt ratios. D. Firms may fail to undertake positive-NPV projects if they would have to be financed with a new issue of equity 21. Which of the following statements regarding interest tax shields is correct? A. Taxes are reduced by the amount of a firm's interest-bearing debt. B. Taxable income is reduced by the amount of a firm's interest-bearing debt. C. Taxes are reduced by the amount of the interest on a firm's debt. D. Taxable Income is reduced by the amount of the interest on a firm's debt