hard · Principles of Finance

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 assets like land and machinery.
2. Stable, predictable revenues from long-term government contracts.
3. An increase in the corporate marginal tax rate.
4. High volatility of operating cash flows and high research and development (R&D) intensity.

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