8. More on capital structure theory Aa Aa The Modigliani and Miller theories are based on several unrealistic assumptions 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? O Firms with volatile earnings Firms with stable earnings Based on your understanding of the capital structure theories, identify the best option for the missing part of the statement Option1 Option2 According to signalling theory, if managers expect the firm's stock price to decrease, they are ???? to raise capital through equity financing Encouraged Discouraged According to the windows of opportunity theory managers ???? in efficient markets Don't believe Believe Under the pecking-order hypothesis, a firm will raise capital by using its net income, selling its marketable securities, issuing debt, and then issuing stock as the last resort. This statement is ????. True False