Which of the following statements about the trade-off theory of capital structure is most correct?
1) The trade-off theory can be used to set a precise optimal structure for any given business.
2) The trade-off theory tells us that businesses should use almost 100 percent debt financing.
3) The trade-off theory tells us that businesses should use almost no debt financing.
4) The trade-off theory tells us that businesses should use some debt financing but not too much.
5) The trade-off theory has no applicability to not-for-profit businesses.