medium · Principles of Finance cost-of-capital-structure

Which of the following would likely lead a firm to choose a lower Debt-to-Equity ratio in its target capital structure?

1. A high proportion of tangible fixed assets, such as land, buildings, and machinery.
2. Stable and highly predictable revenues generated under long-term government contracts each year.
3. An increase in the corporate marginal tax rate, which raises the value of the interest tax shield.
4. High volatility of operating cash flows and high research and development (R&D) intensity.

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