Its Current Financial Policies, Flagstaff Incwill Have to Issue New

question 53

Multiple Choice

its current financial policies, Flagstaff Incwill have to issue new common stock to fund its capital budget Since new stock has a higher cost than retained earnings, Flagstaff would like to avoid issuing new stock Which of the following actions would REDUCE its need to issue new common stock?

• A) Increase the percentage of debt in the target capital structure.
• B) Increase the proposed capital budget.
• C) Reduce the amount of short-term bank debt in order to increase the current ratio.
• D) Reduce the percentage of debt in the target capital structure.
• E) Increase the dividend payout ratio for the upcoming year.

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Definitions:

Present Value

The current value of a future amount of money or stream of cash flows given a specified rate of return, used in discounting to assess investment opportunities.

Compounded Quarterly

Compounded quarterly refers to the calculation of interest on the initial principal and the accumulated interest over previous periods every quarter.

Interest Rate

The percent of principal charged by the lender for the use of its money.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, used in assessing investment opportunities.