A firm's financing hierarchy is concerned with:

I. How the firm's prospective level of debt financing compares with other firms in its industry

II. The dilutive effect of issuing additional stock upon ownership influence and earnings distributions

III. The impact of the relative costs of debt, retained earnings, and new common stock upon capital structure

A. I only

B. II only

C. III only

D. I and II only

E. II and III only

In a follow-up to their original paper, Modigliani and Miller proposed that:

I. The lack of available financial capital would have no impact upon firm value

II. The tax-shield benefits of debt financing would be exactly offset by the costs of increasing default risk

III. It is not possible for actual agency costs to be incurred, since stakeholders will set aside any differences in an effort to increase firm value

A. I only

B. II only

C. III only

D. I and II only

E. II and III only

F. I, II, and III only