Which of the Following Is NOT an Implication of the Pecking

question 1

Multiple Choice

Which of the following is NOT an implication of the pecking order theory of capital structure?

• A) On average,a firm's stock price drops when it announces an equity issue.
• B) Firms may want to maintain a reserve of cash or unused borrowing capacity.
• C) More-profitable firms (all else equal)should have higher debt ratios.
• D) Firms may fail to undertake positive-NPV projects if they would have to be financed with a new issue of equity.

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