6. According to the pecking order theory: A. new debt is preferable to new equity. B. new debt is preferable to internally generated funds. C. new equity is always preferable to other sources of capital. 7. According to the static trade-off theory: A. debt should be used only as a last resort. B. companies have an optimal level of debt. C. the capital structure decision is irrelevant. 8. According to the free cash flow hypothesis: A. an increase in the use of debt can reduce costs of asymmetric information. B. an increase in the use of debt can reduce agency costs. C. an increase in the use of debt can reduce costs of financial distress. 9. In a complex world with market imperfections, the optimal capital structure is: A. 0% debt. B. 100% debt. C. none of the above. 10. Which of the following companies is expected to have higher costs associated with financial distress? A. An airline company. B. A pharmaceutical company. C. A shipping company