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Management Has Just Discovered an Excellent Investment Opportunity and Needs

Question 2

Multiple Choice

Management has just discovered an excellent investment opportunity and needs additional funding for it.According to the pecking order theory,the company should:


A) Use debt financing if management believes the shares are undervalued
B) Use equity financing if management believes the shares are undervalued
C) Use debt financing if management believes the shares are overvalued
D) Forego the investment opportunity

Correct Answer:

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