Neptune Corporation borrowed extensively when interest rates were low. Now the firm wants to decrease its degree of financial leverage. The firm currently has the following capital structure: Common Equity $20,000,000 (25% weight) Bonds $60,000,000 (75% weight) The firm can decrease financial leverage by: Financing its future investments with bank loans instead of bonds O Issuing common stock and using the proceeds to pay off bonds All of the answer choices are correct O Financing its future investments with a higher portion of bonds

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Neptune Corporation borrowed extensively when interest rates were low. Now the firm wants
to decrease its degree of financial leverage. The firm currently has the following capital
structure:
Common Equity $20,000,000 (25% weight)
Bonds $60,000,000 (75% weight)
The firm can decrease financial leverage by:
Financing its future investments with bank loans instead of bonds
Issuing common stock and using the proceeds to pay off bonds
O All of the answer choices are correct
Financing its future investments with a higher portion of bonds
Transcribed Image Text:Neptune Corporation borrowed extensively when interest rates were low. Now the firm wants to decrease its degree of financial leverage. The firm currently has the following capital structure: Common Equity $20,000,000 (25% weight) Bonds $60,000,000 (75% weight) The firm can decrease financial leverage by: Financing its future investments with bank loans instead of bonds Issuing common stock and using the proceeds to pay off bonds O All of the answer choices are correct Financing its future investments with a higher portion of bonds
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