Author Question: Victor Publishing is considering a proposed increase in its debt ratio, which would also increase ... (Read 414 times)

bvyeehaw · **on:** Aug 7, 2023

Victor Publishing is considering a proposed increase in its debt ratio, which would also increase the company’s interest expense. The plan would involve issuing new bonds and using the proceeds to buy back shares of its common stock. The company’s CFO thinks the plan will not change total assets or operating income but that it will increase earnings per share (EPS). Assuming the CFO’s estimates are correct, which of the following statements is correct?

◦

Since the proposed plan increases Victor’s business risk, the company’s share price is also likely to decline.

◦

Since the proposed plan increases Victor’s financial risk, the company’s share price still might fall even if EPS increases.

◦

Since the plan is expected to increase EPS, this implies that EBIT is also expected to increase.

◦

If the plan does increase the EPS, the share price will automatically increase at the same rate.

delmiss · **Reply #1 on:** Aug 7, 2023

A FREE account is required to view all solutions!

Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.

Answer Preview

Only 36% of students answer this correctly