Quiz Ch 13 – Effects of Adjusting Debt Ratio on EPS and Stock Price
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
The CFO of a company is contemplating a change in the target debt ratio, resulting in higher interest expenses. Proceeds from issuing new bonds will be used to repurchase common stock, maintaining total assets and operating income. This maneuver is anticipated to raise the expected earnings per share (EPS). Given this scenario, which of the following statements is accurate?