Which of the following about optimal capital structure is incorrect?   Optimal capital structure is the mixed of debt and equity capital that minimizes the firm’s weighted average cost of capital A company that follows the pecking order theory will use external financing thru debt after exhausting all the possible financing thru equity The management empire-building theory views high interest payments as to prevent management from unreasonable spending A company can take advantage of its high corporate tax rate as tax shield, under the trade-off theory

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Which of the following about optimal capital structure is incorrect?
 
Optimal capital structure is the mixed of debt and equity capital that minimizes the firm’s weighted average cost of capital
A company that follows the pecking order theory will use external financing thru debt after exhausting all the possible financing thru equity
The management empire-building theory views high interest payments as to prevent management from unreasonable spending
A company can take advantage of its high corporate tax rate as tax shield, under the trade-off theory
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