Multiple Choice
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.
Correct Answer:
Verified
Correct Answer:
Verified
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