The Available Options of the Firm with an Overhanging Issue

question 171

Multiple Choice

The available options of the firm with an overhanging issue to finance the call include all of the following EXCEPT

• A) selling additional debt resulting in a higher debt ratio.
• B) using current retained earnings.
• C) selling additional common equity resulting in less dilution of EPS.
• D) selling additional preferred stock resulting in higher financial leverage.

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Definitions:

Energy Efficiency

The goal of using less energy to provide the same service or achieve the same outcome.

Time-Value Of Money

The idea that a specific amount of money is more valuable to a person the sooner it is received because the money can be placed in a financial account or investment and earn compound interest over time; the opportunity cost of receiving a sum of money later rather than earlier.

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, paid to the lender over a specified period of time.

Present Value

The today's value of money to be received in the future or continuous cash inflows, adjusted for a certain interest rate.