10. Assuming the presence of corporate taxes, case 2 of the Modigliani and Miller argues that firms should take out only . In reality, firms face increasing costs of distress from taking on additional debt like bankruptcy costs that reduce the optimal debt a firm should carry due to the large interest payments from debt. The theory argues that firms should balance the marginal benefits from the tax-deductability of interest payments with the marginal costs of additional bankruptcy or financial distress risk. (a) debt; variable; Static Trade-off (b) debt; fixed; Pecking-Order (c) debt; fixed; Static Trade-off (d) equity; fixed; Static Trade-off