FIN 534 RANK Imagine Your Future /fin534rank.com FIN 534 RANK Imagine Your Future /fin534rank.com | Page 27
Which of the following statements is CORRECT?
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Question 11
Which of these items will not generally be affected by an
increase in the debt ratio?
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Question 12
Based on the information below for Benson Corporation, what is
the optimal capital structure?
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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?