Explain static theory of capital structure, Corporate Finance

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Question 1:

(a) Show the forces driving cross-border mergers that operate more strongly than the reasons for transactions that take place within a given country's border.

(b) What are two theoretical reasons why divestitures might create wealth?

Question 2:

(a) Explain the trade-off that defines the static theory of capital structure.

(b) Describe the pecking-order theory of capital structure and discuss the implications associated with it that are at odds with the trade-off theory.

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