Cordelion Communications Is Considering Issuing New Common Stock and Using

question 77

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.

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Definitions:

Arcuate Artery

A type of artery, often referenced in relation to kidney or uterine structures, involved in supplying blood.

Ureters

Ureters are muscular tubes that transport urine from the kidneys to the bladder.

Stratified Squamous Epithelium

A type of tissue composed of several layers of flat cells designed to protect underlying tissues in areas subjected to abrasion.

Peristalsis

A series of wave-like muscle contractions that moves food through the digestive tract.