Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. the modigliani and miller theories are based on se

The Modigliani and Miller theories are based on several unrealistic assumption about debt financing. In...

70.2K

Verified Solution

Question

Accounting

image

The Modigliani and Miller theories are based on several unrealistic assumption about debt financing. In reality, there are costs, taxes, and other factors associated with debt financing. These costs or effects have led to several theories that explain the impact of these factors on the capital structure of a firm. Based on your understanding of the trade-off theory, what kind of firms are likely to use more leverage? Firms with a higher proportion of variable-versus-fixed costs Firms with a higher proportion of fixed-versus-variable costs Based on your understanding of the capital structure theories, identify the best option for the missing part of the statement. Several dominant theories try to explain why financial managers make the capital structure decisions that they do. The following statement describes one such theory. Consider this case: The firm's debt-equity decision finds the optimal balance between the interest tax shield benefits of debt financing and the costs of financial distress associated with issuing debt. Identify which of the two theories is described by the statement. Trade-off theory Pecking-order hypothesis

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Solve the following initial value problems (1) dy/dt = t + y y(0) = 1 so...

Basic Math
Q

Professor Fair believes that extra time does not improve grades on exams. He randomly divided a...

Basic Math
Q

1.For both insulin and glucagon: Identify conditions under which it will be present in the blood...

Biology
Q

Psychology Research methods and design Short answer questions 1) Know the primary distinctions between qualitative and quantitative research. 2)...

Psychology
Q

An object of mass M is gently placed on a horizontal conveyor belt which is...

Physics
Q

4 Let A be a 3 x 3 matrix with 3 columns a A2 A3...

Calculus
Q

44 Evaluate the expression Sin A H TT 4 B C 3TT 3TT D 71...

Calculus
Q

150 50 572 16 6pts Make the following conversions a 2016 82 2x3 2x6 0x68...

Algebra
Q

Determine the amount of tax liability in the following situations. In all cases, the taxpayer...

Accounting
Q

As the company must obey ASICs regulations, list five categories of principles under corporate code...

Accounting
Q

E8-15(Algo) Preparing Budgeted Income Statement [LO 8-3h] Ceder Company has compiled the following data...

Accounting
Q

Thank u On August 1, Cullumber, Inc. exchanged productive...

Accounting