Two corporations consider obtaining debt financing for a business expansion

Two corporations consider obtaining debt financing for a business expansion.Firm A is a mid-cap corporation that produces software and IT services, and has been quite successful in the market over recent years. Firm B is a small corporation that operates a new chain of food stores, which have a rather stable,though moderate, profit margin. Both firms are in the same corporate tax bracket.1. (8 points)Explain which firm is more likely to have a higher debt ratio according to each of the following theoriesa. The Modigliani and Miller theory with corporate taxesb. The pecking order theory c. The trade-off theory