Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. the static-tradeoff theory and the pecking order t

the static-tradeoff theory and the pecking order theory. Do you think either theory represents how capital...

80.2K

Verified Solution

Question

Accounting

the static-tradeoff theory and the pecking order theory. Doyou think either theory represents how capital structure decisionsare made in practice? If so, which theory is more closely alignedwith CFO actions? If not, what do these theories fail to captureabout the actions of financial managers.

minimum 300 words

Answer & Explanation Solved by verified expert
3.6 Ratings (614 Votes)
The capital structure is the mix between the equity debt and the revenue component that a firm uses to fund growth and operations The mix between the equity and capital maybe such that the cost of capital is minimized and the value of the firm is increased There are basically three theories the net income approach theory the static tradeoff theory more commonly known as MM theory devised by Modigliani and Miller hence the name MM and the Pecking order theory The Static TradeOff theory Devised by economist Modigliani and Miller in 1950s The theory suggests that a value of a firm is independent of the capital structure under certain assumptions namely 1 this theory applies in perfect market competition where the investors are free to buy and sell securities other assumptions in perfect market includes that there    See Answer
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

In 2013, Slim Drug Company began to notice problems with its obesity drug. The company stopped...

Accounting
Q

The following 5 questions are based on this information. A random sample of 25 Apple (the company)...

Statistics
Q

Write an executive summary on Ernst-Merchant Chip Formation theory and its practical applications in machining industries. (Hints: draw...

Mechanical Engineering
Q

A 2.25

Physics
Q

Whispering Company reports pretax financial income of $66,100 for 2020. The following items cause taxable income...

Accounting
Q

ii A point charge q 2 C is placed at origin point O The electric...

Physics
Q

What is the expression in radical form 7x y Enter your answer in simplest form...

Algebra
Q

Debits Credits $350,000 $32,000 6,500 Account Title Sales revenue Loss on sale of investments Interest...

Accounting
Q

Proud Corporation acquired 80 percent of Spirited Companys voting stock on January 1, 20X3, at...

Accounting
Q

data analytics tests help to identify anomalous outliers. The relative size factor test is one...

Accounting
Q

Malaysia Inc. compr un gasto de capital por valor de Php1,500 e inform ingresos de...

Accounting
Q

Qu Question 3 3 Use the following information to answer Questions 3 and 5. A...

Finance