he financial manager of a large national firm was overheard making the following statement: 'We try to use as much retained earnings as possible for capital budgeting purposes because there is no explicit cost to these funds, and this allows us to invest in relatively low yielding projects that would not be feasible if we had to use new common stock. We actually use retained earnings to invest in projects with yields below the coupon rate on our bonds." Comment on the validity of this statement from your point of vi

he financial manager of a large national firm was overheard making the following statement: 'We try to use as much retained earnings as possible for capital budgeting purposes because there is no explicit cost to these funds, and this allows us to invest in relatively low yielding projects that would not be feasible if we had to use new common stock. We actually use retained earnings to invest in projects with yields below the coupon rate on our bonds." Comment on the validity of this statement from your point of vi

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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