With Its Current Financial Policies, Flagstaff Inc

question 8

Multiple Choice

With its current financial policies, Flagstaff Inc.will have to issue new common stock to fund its capital budget.Since new stock has a higher cost than reinvested earnings, Flagstaff would like to avoid issuing new stock.Which of the following actions would REDUCE its need to issue new common stock?

• A) Increase the percentage of debt in the target capital structure.
• B) Increase the proposed capital budget.
• C) Reduce the amount of short-term bank debt in order to increase the current ratio.
• D) Reduce the percentage of debt in the target capital structure.
• E) Increase the dividend payout ratio for the upcoming year.

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