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 a higher proportion of fixed-versus-variable costs O Firms with a higher proportion of variable-versus-fixed costs Based on your understanding of the capital structure theories, identify the best option for the missing part of each statement. option 1 Option 2 According to signa theory, if managers expect the firm's stock price to decrease, they are to raise capital through equity financing Encouraged Discouraged High levels of debt reduce excess cash flows and 2222 managers' decisions, thereby reducing the possibility that managers will engage in wasteful spending Help Constrain 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