All of the Following Statements Are Correct Except

question 83

Multiple Choice

All of the following statements are correct except:

• A)The pecking order hypothesis is a theory that states managers prefer to use additions to retained earnings to finance the firm, then debt, and (as a final resort) new equity.
• B)The market timing hypothesis states that firms try to time the equity market by issuing stock when their stock prices are high and repurchasing shares when stock values are low.
• C)The static tradeoff hypothesis states that firms will balance the advantages of debt (its lower cost and tax-deductibility of interest) with its disadvantages (greater possibility of bankruptcy and the value of explicit and implicit bankruptcy costs).
• D)Agency costs reduce the optimal level of debt financing for a firm below the level that would be appropriate if agency costs were zero.
• E)All of the above statements are correct.
• Too many clones

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Definitions:

Signal Detection

The process of identifying and processing essential information from a background of non-essential or irrelevant information.

Naysayers

People who are habitually negative or skeptical, often dismissing or doubting ideas or changes.

Yea-Sayers

Individuals who habitually agree with or support a particular idea, cause, or leader without critical consideration.

Misses

Instances in which a desired or expected outcome does not occur, often used in the context of errors or failures in perception, memory, or action.