From the list below, select TWO statements that are TRUE.

Don't try to click on all four statements! Negative points are given for all incorrectly chosen statements.

		Studies have shown that some firms choose their capital structure in such a way that it brings the most after-tax cash to its investors. For example, if a firm faces a 15% corporate income tax rate, its stockholders face a 20% income tax rate, and its creditors face a 35% tax rate, then such firm may choose to have more debt.
		Under the pecking order theory firms try to avoid sending signals to the investors, which is the opposite from what the signaling theory says.
		The signaling theory says that by taking a new loan the firm sends a positive signal to the investors that the firm is not in financial distress.
		When the firm is in financial distress, stockholders have an incentive to underinvest. That's because underinvesting means that they would be contributing nothing to the project today (while the bondholders would be contributing the full amount of the required initial cost) but receive part of the project's future cash flow.