A valuable firm will tend to: a. see its stock price increase if it issues debt
ID: 2764754 • Letter: A
Question
A valuable firm will tend to:
a. see its stock price increase if it issues debt beyond its optimal debt level.
b. issue more debt than a less valuable firm of comparible size.
c. reduce its debt level as a positive signal for the firm.
d. issue debt, but only on a temporary basis purely to fool investors regarding the firm's value.
e. see its stock price increase when it announces an exchange offer that decreases its leverage.
A valuable firm will tend to:
a. see its stock price increase if it issues debt beyond its optimal debt level.
b. issue more debt than a less valuable firm of comparible size.
c. reduce its debt level as a positive signal for the firm.
d. issue debt, but only on a temporary basis purely to fool investors regarding the firm's value.
e. see its stock price increase when it announces an exchange offer that decreases its leverage.
Explanation / Answer
c ) reduce its debt level as a positive signal for the firm