Answer-According to the Trade-off Theory, firms balance:

Trade-off theory states firms choose an optimal capital structure by balancing tax shield benefits of debt against bankruptcyfinancial distress costs.

Question

According to the Trade-off Theory, firms

balance:

A Cost of equity vs cost of debt only.

B Tax shield benefits of debt vs costs of financial distress.

C Dividend payments vs retained earnings.

D Agency costs vs signalling benefits.

E Market timing vs pecking order.

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According to the Trade-off Theory, firms

Solution