The Pecking Order States How Financing Should Be Raised

question 12

Multiple Choice

The pecking order states how financing should be raised. In order to avoid asymmetric information problems and misinterpretation of whether management is sending a signal on security overvaluation,the firm's first rule is to:

• A) finance with internally generated funds.
• B) always issue debt then the market won't know when management thinks the security is overvalued.
• C) issue new equity first.
• D) issue debt first.
• E) None of these.

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