According to the trade-off theory that has been suggested as a possible explanation for the differences in firms' capital structures that we observe in the real world, which of the following securities is the least expensive form of financing for a particular firm?
A)Common stock
B)Preferred stock
C)Corporate debt
D)Retained earnings
E)Classified stock

Question

Quizplus · Accepted Answer

Corporate debt is often considered the least expensive form of financing due to the tax deductibility of interest payments, which reduces the effective cost of debt for firms.

According to the Trade-Off Theory That Has Been Suggested as a Possible