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goblinko [34]
3 years ago
7

A firm's CFO is considering increasing the target debt ratio, which would also increase the company's interest expense. New bond

s would be issued and the proceeds would be used to buy back shares of common stock. Neither total assets nor operating income would change, but expected earnings per share (EPS) would increase. Assuming the CFO's estimates are correct, which of the following statements is CORRECT?a. Since the proposed plan increases the firm's financial risk, the stock price might fall even if EPS increases.b. If the plan reduces the WACC, the stock price is likely to decline.c. Since the plan is expected to increase EPS, this implies that net income is also expected to increase.d. If the plan does increase the EPS, the stock price will automatically increase at the same rate.e. Under the plan there will be more bonds outstanding, and that will increase their liquidity and thus lower the interest rate on the currently outstanding bonds.
Business
1 answer:
mylen [45]3 years ago
6 0

Answer:

A

Explanation:

Since the proposed plan increases the firm's financial risk, the stock price might fall even if EPS increases.

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Policies related to setting interest rates, control of currency supply, and the buying/selling of treasury bonds are referred co
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<h3>What is monetary policy and fiscal policy?</h3>

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1 year ago
When I called about the cost of theses items it was implied total would only be 35.00
elixir [45]

Answer:

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Explanation:

7 0
3 years ago
An employee is dissatisfied with the resolution of an ethical conflict with his supervisor at his place of employment. According
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Answer: Contact the top level of the management who is not involve in the ethical conflict      

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7 0
2 years ago
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The theory of rational expectations is a hypothesis of economic science that states that predictions about the future value of economically relevant variables made by agents are not systematically wrong and that errors are random (white noise). An alternative formulation is that rational expectations are "consistent expectations around a model," that is, in a model, agents assume that the predictions of the model are valid. The rational expectations hypothesis is used in many contemporary macroeconomic models, in game theory and in applications of rational choice theory.

Since most current macroeconomic models study decisions over several periods, the expectations of workers, consumers and companies about future economic conditions are an essential part of the model. There has been much discussion about how to model these expectations and the macroeconomic predictions of a model may differ depending on the assumptions about the expectations (see the web's theorem). To assume rational expectations is to assume that the expectations of economic agents can be individually wrong, but correct on average. In other words, although the future is not totally predictable, it is assumed that the agents' expectations are not systematically biased and that they use all the relevant information to form their expectations on economic variables.

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