(b) What are the main assumptions underlying standard applications of the WACC method? Are these assumptions plausible, also in light of the existing empirical evidence? In the alternative APV method, it is often assumed that the tax shields should be discounted using the cost of debt. Do you think this a reasonable assumption in real- world, practical applications? Word limit: 350 words] (20 marks) (c) Compare and contrast the assumptions and implications of the trade-off theory with those of the pecking order theory of capital structure. Briefly highlight evidence that supports the pecking order theory while being inconsistent with the trade-off theory. [Word limit: 300 words] (15 marks) (b) What are the main assumptions underlying standard applications of the WACC method? Are these assumptions plausible, also in light of the existing empirical evidence? In the alternative APV method, it is often assumed that the tax shields should be discounted using the cost of debt. Do you think this a reasonable assumption in real- world, practical applications? Word limit: 350 words] (20 marks) (c) Compare and contrast the assumptions and implications of the trade-off theory with those of the pecking order theory of capital structure. Briefly highlight evidence that supports the pecking order theory while being inconsistent with the trade-off theory. [Word limit: 300 words] (15 marks)