According to Pecking-Order Theory, Managers Will Often Choose to Finance

question 68

Multiple Choice

According to pecking-order theory, managers will often choose to finance with:

• A)New equity rather than debt, due to bankruptcy costs
• B)Debt rather than new equity, to avoid reduced share price
• C)Debt rather than retained earnings, to lower the WACC
• D)New equity rather than debt, to strengthen EPS

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Definitions:

Reciprocity

A practice or agreement where two parties provide each other with mutual benefits, often used in trade agreements and social interactions.

International Strategy

The planning and execution of business operations to expand and operate in multiple countries, involving considerations of globalization, market entry, and cultural differences.

National Strategy

A comprehensive plan designed to achieve specific goals on a country-wide scale.

Dominant Strategy

In game theory, a strategy that is best for a player, irrespective of what strategies other players choose.