The Pecking Order Theory: a Company Wishes to Undertake a Project

question 71

Multiple Choice

The pecking order theory: A company wishes to undertake a project that costs $150mm. It currently has $10mm in cash on hand and believes that it can raise $75mm in debt and $100mm in equity if needed. According to the pecking order theory of the capital structure, what per cent of the project will be financed by debt?

• A) 0%
• B) 26.67%
• C) 50%
• D) None of the above

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