Which of the following is NOT an implication of the pecking order theory of capital structure?

Multiple Choice

Firms may fail to undertake attractive investments if they would have to be financed with a new issue of equity.

More$-$profitable firms $($all else equal$)$ should have higher debt ratios.

Firms may want to maintain a reserve of cash or unused borrowing capacity.

On average, a firm$$s stock price drops when it announces an equity issue.