Question: Please can you answer this question with all workings 6. Capital Structure Decision [25 Marks] a) What are the bankruptcy costs and agency costs in

Please can you answer this question with all workings

6. Capital Structure Decision [25 Marks] a) What are the bankruptcy costs and agency costs in financial distress? Explain each of the costs and provide an example. [10 Marks] b) What does the trade-off theory predict about the relationship between profitability and target debt ratios? Is the theory's prediction consistent with the facts? Explain your answer. [7 Marks] c) Explain what is meant by the pecking order theory and how it relates to observed capital structures of companies. Discuss the two faces of financial slack. [8 Marks] ECO-20051 Finance 2 6/7

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