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?
The company's earnings per share would decline.
The company's cost of equity would increase.
The company's ROA would increase.
The company's ROE would decline.
The company's net income would increase.
Answers (1)
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Blueline Publishers is considering a recapitalization plan. It is currently 100% equity financed but under the plan it would issue ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Beverage International reports net credit sales for the year of $252,000. The company's accounts receivable balance at the beginning of the year equaled $48,000 and the balance at the end of the year equaled $58,000.
Answers (1)
Yates Corp. wants to develop a cost equation for its administrative costs. The controller believes the appropriate cost driver is units produced.
Answers (1)
A truck costs $35,000 with a residual value of $2000. its service life is five years using the declining balance method at twice the straight line rate the book value at the end of year 2 is
Answers (1)
Which of the following characteristics does not usually apply to process manufacturing systems? A. Each unit of product is separately identifiable. B. Partially completed products are transferred between processes. C.
Answers (1)
You want to purchase a new condominium which costs $329,000. Your plan is to pay 20 percent down in cash and finance the balance over 25 years at 6.25 percent. What will be your monthly mortgage payment
Answers (1)
New Questions in Business
During the month of July, Clanton Industries issued a check in the amount of $767 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:
Answers (1)
A bond will sell at a premium (above par value) ifA) the market value of the bond is greater than the discount rate of the bond. B) investor's current required rate of return is below the coupon rate of the bond.
Answers (1)
Which financial transaction is associated with the home rental process? a. down payment b. closing fee c. deposit d. taxes, tags, and title fees
Answers (1)
When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for
Answers (1)
Critical analysis Q8 When actual output exceeds an economy's full-employment output, how will the self-correcting mechanism direct the economy to long-run equilibrium? Prices will increase causing production costs, which will reduce aggregate supply.
Answers (1)