Everything Else Equal, If a Firm with Favorable Future Prospects

question 28

Multiple Choice

Everything else equal, if a firm with favorable future prospects raises funds by issuing new shares of common stock, _____. 

• A)its debt/assets ratio should increase
• B)its marginal bankruptcy-related costs should increase
• C)its retained earnings will increase immediately
• D)its taxable income should decrease
• E)the price of its stock will increase when future profits are realized by the firm

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Definitions:

Nominal Scale

A level of measurement used for data that can be categorized but not logically ordered, involving labels or names without inherent numerical value.

Variables

Variables are elements or factors that can change and affect the outcome of scientific experiments or research studies.

Regression Equation

A statistical method used to predict the value of a dependent variable based on one or more independent variables.

Known Score

A score or result that is established or confirmed prior to experimentation or analysis.