If a corporation repurchases its debt, which of the following statements are TRUE?
I The corporation's capitalization will increase
II The corporation's capitalization will decrease
III The market value of the common stock will increase
IV The market value of the common stock will decrease
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Ответ:
II and III
Explanation:
The best answer is ii and iii. If a corporation repurchases its debt, then its capitalization will decrease. Corporations repurchase debt to refinance at smaller interest rates so as to To increase the market value of the corporation's common stock. If corporation has less debt, the common stock would have more value and to reduce the corporation's earnings fluctuation's due to cyclical conditions. Corporate sales fall because of cyclical conditions, but fixed interest charges do not. This causes earnings for common shareholders to reduce in period of falling sales. To reduce this possibility, a corporation can repurchase its debt.
Ответ:
Answer below:
Explanation:
I would ask if he wants the highest return rates possible? interested in setting money aside to take advantage of compound interest and letting it grow over time? If you choose to invest do you understand that it comes with possible risk? Do you prefer playing it safe and getting an annual return of 0 to 2 % or playing it risky by investing and getting a potential 6 to 10 % annual return?