Finance Which of the following statements accurately describe the nature and/or impact of the pecking order theory of capital structure? Group of answer choices (a) Firms are reluctant to issue equity because of the positive signal that sends about the firm's future prospects. (b) Firms that have been more profitable in the past are more likely to have to raise debt capital and hence will be more likely to have higher debt levels. (c) The theory relies, in part, on the assumption that investors do not know as much about the firm's future prospects as the managers do. (d) The best projects are financed by equity, worse projects by the most senior debt, and the worst projects by equity. (e) None of the above statements are correct.
Finance Which of the following statements accurately describe the nature and/or impact of the pecking order theory of capital structure? Group of answer choices (a) Firms are reluctant to issue equity because of the positive signal that sends about the firm's future prospects. (b) Firms that have been more profitable in the past are more likely to have to raise debt capital and hence will be more likely to have higher debt levels. (c) The theory relies, in part, on the assumption that investors do not know as much about the firm's future prospects as the managers do. (d) The best projects are financed by equity, worse projects by the most senior debt, and the worst projects by equity. (e) None of the above statements are correct.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Finance
Which of the following statements accurately
describe the nature and/or impact of the
pecking order theory of capital structure?
Group of answer choices
(a) Firms are reluctant to issue equity because
of the positive signal that sends about the
firm's future prospects.
(b) Firms that have been more profitable in
the past are more likely to have to raise debt
capital and hence will be more likely to have
higher debt levels.
(c) The theory relies, in part, on the
assumption that investors do not know as
much about the firm's future prospects as the
managers do.
(d) The best projects are financed by equity,
worse projects by the most senior debt, and
the worst projects by equity.
(e) None of the above statements are correct.
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