Which of the following statements accurately describes features of the trade-off theory of capital structure? The theory suppests that companies will first prefer to use internal funds, then issue debt, then hybrid securities and finally external equity. The theory suggests that the optimal level of debt taken on will be at least partly be associated with the level of business risk that the femis exposed to None of the other statements accurately describe features of the trade-off theory of capital structure More than one of the other statements accurately describe features of the trade-off theory of capital structure The theory suggests that firms need to trade-off the benefits associated with the tax Shield provided by equity with the adverse effects associated with increasing costs of financial distress Which of the following statements accurately describe the link between "free cash flows and the decision about how much debt should be issued? Firms are limited in how much debt they can issue because debtholders are concerned about a transfer of wealth to shareholders by the form knocking back positive NPV projects Firms are limited in how much debt they can issue because debtholders are concerned that firms might replace less risky existing projects with more risky new projects to enhance shareholder value More than one of the other statements accurately describe the link between free cash flows and the decision about how much debt should be Issued None of the other statements accurately describe the link between free cash flows and the decision about how much debt should be issued The tax deductibility of interest can increase the value of the firm's assets as leverage increases