Taggart Technologies Is Considering Issuing New Common Stock and Using

question 52

Multiple Choice

Taggart Technologies is considering issuing new common stock and using the proceeds to reduce its outstanding debt.The stock issue would have no effect on total assets,the interest rate Taggart pays,EBIT,or the tax rate.Which of the following is likely to occur if the company goes ahead with the stock issue?

• A) The ROA will decline.
• B) Taxable income will decline.
• C) The tax bill will increase.
• D) Net income will decrease.
• E) The times-interest-earned ratio will decrease.

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Definitions:

Imported Oil

Oil brought into a country from another country to meet its demand for energy and petroleum products.

Tariff

A tax imposed by a government on imports or exports of goods.

Imported Oil

Oil that is brought into a country from abroad for use as fuel or raw material in various industries.

Tariff Revenue

The income generated by a government from imposing taxes on imported goods.