Pecking Order Theory and ABC Corp Financing Decisions

ABC Corp is a mid-sized manufacturing company that has been experiencing steady growth over the past five years. It has maintained a conservative capital structure with low levels of debt. Recently, the management team is considering various financing options to fund a new product line, which requires significant capital investment. As part of their assessment, they consult the pecking order theory and examine their priorities in financing decision-making.

According to the pecking order theory, firms prefer to finance new projects using internal funds first, then debt, and finally equity as a last resort. As a member of the finance team, your task is to assess the implications of the pecking order theory in relation to ABC Corp’s current situation. Which of the following statements best illustrates the impact of the pecking order theory on ABC Corp's potential financing decisions?