theory. According to T&M Stalic there is no optimal capital structure. According to present value of bankruptcy costs. According to According to debt and equity. Tor Story firm's trade off the relative benefits of the interest tax shield with the firm's should minimize their cost of equity. profitable firms with large Retained Earnings require less external

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Compare the M&M static theory of capital structure with taxes (M&M for short) with the pecking order
theory.
According to
✓, there is no optimal capital structure.
According to
present value of bankruptcy costs.
According to
According to
debt and equity.
firm's trade off the relative benefits of the interest tax shield with the
firm's should minimize their cost of equity.
✓, profitable firms with large Retained Earnings require less external
Transcribed Image Text:Compare the M&M static theory of capital structure with taxes (M&M for short) with the pecking order theory. According to ✓, there is no optimal capital structure. According to present value of bankruptcy costs. According to According to debt and equity. firm's trade off the relative benefits of the interest tax shield with the firm's should minimize their cost of equity. ✓, profitable firms with large Retained Earnings require less external
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