The CFO of Daves Industries Plans to Have the Company

question 12

Multiple Choice

The CFO of Daves Industries plans to have the company issue $300 million of new common stock and use the proceeds to pay off some of its outstanding bonds that carry a 7% interest rate.Assume that the company,which does not pay any dividends,takes this action,and that total assets,operating income (EBIT) ,and its tax rate all remain constant.Which of the following would occur?

• A)The company's taxable income would fall.
• B)The company's interest expense would remain constant.
• C)The company would have less common equity than before.
• D)The company's net income would increase.
• E)The company would have to pay less taxes.

Apply the concept of opportunity cost in economic decision-making.

Appreciate Adam Smith’s contribution to understanding the significance of specialization and economies of scale in economic theory.

Grasp the concept of diminishing marginal productivity and its impact on cost functions.

Understand how to calculate average fixed cost, average variable cost, and average total cost from given production and cost data.

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Definitions:

Transformational Change

A profound or radical change that fundamentally alters the culture, core values, and operations of an organization, often leading to a shift in its business direction.

Bottom-up Change

A change initiative that starts at the lower levels of an organization and seeks approval or acceptance from higher levels.

Incremental Change

Gradual, step-by-step modifications made in processes, practices, or policies within an organization to improve or adapt.

Frame-bending Change

A transformational approach that significantly alters the existing norms, structures, or practices within an organization.