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Impact of Trade-off Theory on Capital Structure

CORPFN-JCMBHF

Based on the trade-​off theory of capital structure, what difference might you expect in the capital structure of a food producer and a biotechnology firm?

A

​Higher debt ratio for the food producer.

B

Higher debt ratio for the biotechnology firm.​

C

Neither firm should use debt in their capital structure.

D

Differences in capital structure will make no valuation differences in these firms.