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Unformatted text preview: y that can be used if an especially good investment opportunity comes along. b. In general, an increase in the corporate tax rate would cause firms to use less debt in their capital structures. c. According to the static trade‐off theory, an increase in the costs of bankruptcy would lead firms to reduce the amount of debt in their capital structures. d. Statements a and c are correct. e. All the statements above are correct. 2. The static (trade‐off) theory of capital structure predicts that: a....
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