Light speed requires $180,000 to fund a new project next year. The firm expects to earn excess cash of $68,000 this year after all expenses, taxes, and dividends are paid. The firm can borrow up to $150,000 at 6.5 percent interest for up to ten years or, it can issue up to 25,000 new shares of stock that will have an estimated value of $35 a share at the end of this year. According to the pecking-order theory, how much will the firm raise in new equity capital to fund this project? 

Answer rating: 100% (QA)

According to the peckingorder theory a company should give internal financing retained earnings debt ... View the full answer