Cordelion Communications Is Considering Issuing New Common Stock and Using

question 83

Multiple Choice

Cordelion Communications 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 Cordelion 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 times interest earned ratio will decrease.
• B) the roa will decline.
• C) taxable income will decrease.
• D) the tax bill will increase.
• E) net income will decrease.

---

Definitions:

Investment Fund Managers

Individuals or entities responsible for making investment decisions on behalf of fund shareholders, aiming to achieve specified investment objectives.

Lower Interest Rates

Reduced rates at which interest is charged on borrowed funds, typically intended to stimulate economic growth by making borrowing cheaper.

Stock Market

A marketplace where shares of public companies are traded, determining the market value of these companies.