Which of the following statements correctly describes the balance between debt and equity as described in the trade-off theory? A. Debt shouldn’t be used because the trade-off between the tax benefits and risk is too volatile.
Which of the following statements correctly describes the balance
between debt and equity as described in the trade-off theory?
A. Debt shouldn’t be used because the trade-off between the tax benefits and risk is too volatile.
B. A company should use equity until its costs exceeds its benefits; then use debt for the rest.
C. A company should finance itself using 50 percent debt, 50 percent equity.
D. A company should use debt until its costs exceeds its benefits; then use equity for the rest.
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