1. Which of the following is an incorrect statement about the Trade-Off Theory and the Pecking Order Theory? A) Trade-off theory balances the tax benefit of debt and the cost of financial distress. B) Pecking order theory stems from assuming the information asymmetry between managers and outside investors. C) Trade-off theory and Pecking order theory offer two different frameworks in finding an optimal capital structure of a firm. D) According to Pecking order theory, it is desirable for a firm to first use internal funds, then use debt over equity when the firm needs external financing. E) Trade-off theory posits that leverage-increasing events and leverage-decreasing events should be positive for a firm if the events lead the firm's financial leverage closer to the optimal level