Which of the following statements about debt financing is most correct?

Debt financing can help managers use excess cash on perquisites.

Debt financing may make managers too risk-averse, therefore causing underinvestment in risky but positive NPV projects.

Debt financing can help managers use excess cash on non-value adding acquisitions.

All of the above statements are correct

Investors often perceive an additional issuance of stock as a positive signal and push the stock price to rise because the information asymmetry problem exists between inside managers and outside investors.

true

false

If the information content, or signaling, hypothesis is correct, changes in dividend policy can be important because investors view dividend changes as signals of managements view of the future.

true

false