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NEW QUESTION: 1
You are preparing an EVA quote for a customer who always purchased a support extension. Which HP service offering must you select to allow support extension to 5 years?
A. HP support Plus 24
B. Proactive 5
C. HP support Plus 5
D. HP Care Pack
NEW QUESTION: 2
Proponents of which of the following theories would claim that companies seek to balance the tax shelter benefits of debt financing with the increased interest rates and risk of bankruptcy that come with increased debt levels?
A. Signaling Theory
B. Tax Preference Theory
C. Modigliani & Miller's "with-taxes" Theory of Capital Structure
D. Trade-off Theory of Leverage
E. Modigliani & Miller's Theory of Capital Structure
F. Bird-in-the-Hand Theory
Trade-off Theory of Leverage
The Trade-off Theory of Leverage claims that firms will seek to balance the tax-shelter benefits of debt financing with the increased interest costs and risk of bankruptcy that come with increased debt levels. The Trade-off Theory of Leverage came about largely from criticisms raised against the Modigliani andMiller Theory of Capital Structure under the "with-taxes" assumption. M&M claimed that, under a restrictive set of assumptions, the value of firms would be maximized only when their capital structure is comprised of 100% debt. The Trade-off Theory of Leverage proposed a more realistic and moderate answer to the Capital Structure debate, and remains an important milestone in the field of Pure Finance.
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