The CFO of Shalit Industries Plans to Have the Company

question 6

Multiple Choice

The CFO of Shalit Industries plans to have the company issue $300 million of new common stock and use the proceeds to pay off some of its outstanding bonds.Assume that the company,which does not pay any dividends,takes this action,and that total assets,operating income (EBIT) ,and its tax rate all remain constant.Which of the following would occur?

• A)The company's taxable income would fall.
• B)The company would have less common equity than before.
• C)The company's net income would increase.
• D)The company would have to pay less tax.

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Definitions:

Population Growth

The increase in the number of individuals in a population over time.

Investment Spending

Expenditures on new capital assets by businesses and the government, aiming to increase future productive capacity.

DVCs

Stands for Developing Countries, referring to nations with lower levels of industrialization and lower Human Development Index than developed countries.

Political Instability

The likelihood of significant change in the governing framework of a country, which can include shifts in government, policy upheavals, or civil unrest.