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Problem 5: One recommendation in the chapter is that companies with promising investment opportunities should strive to maintain a conservative capital structure. Yet many promising

Problem 5: One recommendation in the chapter is that companies with promising investment opportunities should strive to maintain a conservative capital structure. Yet many promising small businesses are heavily indebted.

  • Why should most companies with promising investment opportunities strive to maintain conservative capital structures?
  • Why do you suppose many promising small businesses fail to follow this recommendation?

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