Question 1 7 points Save Answer OR FALSE CHAPTER 17 TRUE From the list below, select all statements that are TRUE. Don't try to click on all four statements Negative points are given for all incorrectly chosen statements The news of an increase in financial leverage may increase the demand for the firm's stock shares and raise their price. That's because the firm's stock investors take this news as a signal of high expected future cash flows from the firm's projects Just like with the signaling theory, under the pecking order theory firms want to send a certain signal to the investors. 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 15% income tax rate, and its creditors face a 30% tax rate, then such firm may choose to have more debt. When the firm is in financial distress, stockholders have an incentive to underinvest. This happens because when they split the project's future cash flow with the lenders to the firm, they do not get the required return on the money that they contributed towards the project