According to the Pecking-Order Theory,managers Will Often Choose to Finance

question 75

Multiple Choice

According to the 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 a fall in the 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:

Real Average Hourly

Real Average Hourly refers to the measurement of average hourly earnings adjusted for inflation, providing a more accurate depiction of purchasing power over time.

Wages

Compensation received by employees for their labor, typically quantified as per hour, day, or unit of work completed.

Winner-Take-All Markets

Markets in which a small number of sellers or creators receive a large majority of the rewards, leaving little for others.

Substitution Effect

The economic principle that as the price of a good decreases, consumers will substitute away from higher-priced goods, and vice versa.