FIN 534 RANK Imagine Your Future / FIN 534 RANK Imagine Your Future / - Page 27

Which of the following statements is CORRECT? • Question 11 Which of these items will not generally be affected by an increase in the debt ratio? • Question 12 Based on the information below for Benson Corporation, what is the optimal capital structure? • Question 13 Blueline Publishers is considering a recapitalization plan. It is currently 100% equity financed but under the plan it would issue long- term debt with a yield of 9% and use the proceeds to repurchase common stock. The recapitalization would not change the company's total assets, nor would it affect the firm's basic earning power, which is currently 15%. The CFO believes that this recapitalization would reduce the WACC and increase stock price. Which of the following would also be likely to occur if the company goes ahead with the recapitalization plan?