The Trade-Off Theory of Capital Structure Predicts That

question 34

Multiple Choice

The trade-off theory of capital structure predicts that

• A)unprofitable firms should borrow more than profitable ones.
• B)safe firms should borrow more than risky ones.
• C)rapidly growing firms should borrow more than mature firms.
• D)increasing leverage increases firm value, especially at high debt ratios.

Calculate the future value of investments with compound interest.

Determine the necessary initial investment to achieve a specific future value.

Understand and calculate the periodic interest rate based on annual rates and compounding frequency.

Calculate the present value of a series of future payments or a future lump sum.

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