In our discussion of capital structure choice, we discussed the idea of a financing $$Pecking Order$.$ Which of the following statements about the Pecking Order Theory are correct:

I$)$ The Pecking Order states that a firm will prefer to use internally generated funds up to the point where interest tax shields just offset the distress costs associated with borrowing.

II$)$ The Pecking Order states that firms that require outside funding only use equity as a last resort.

III$)$ The Pecking Order states that firms in need of capital for investments will have a preference for borrowing but have a stronger preference to fund investments by issuing equity to outside SHs$.$

IV$)$ The Pecking Order states that firms looking to fund investments prefer to avoid outside funding.

A$.$ Only III and IV are correct.

B$.$ Only II and III are correct.

C$.$ All of I$-$IV are correct

D$.$ Only I and II are correct

E$.$ Only II and IV are correct.