Question M3 [5 Points] Which of the following statements is False?

a) In the asset substitution model, the bond holders are not taken by surprise by the management behavior and will have an expected return in line with the one they can get on the market. b) The debt overhang problem stems from the pre-existence of debt.

c) In the pecking order theory, internal funds are the least costly for the shareholders.

d) None of the above.