Which of the following statements is NOT CORRECT? The trade-off theory states that capital structure decisions involve a trade-off between the benefits of debt financing and the problems associated with a possible bankruptcy. O Modigliani and Miller's first article on capital structure led to the conclusion that capital structure is RELEVANT and is extremely important to a company. One example of a "signal" is where a company's announcement of a new common stock issue generally means that its executive leadership believes that the future for the firm is not good. The optimal capital structure simultaneously maximizes the stock price and minimizes the WACC