Which of the following statements is CORRECT? The debt ratio that maximizes expected EPS generally exceeds the debt ratio that maximizes share price. O Increasing its use of financial leverage is one way to increase a firm's return on investors' capital (ROIC). If a company were to issue debt and use the money to repurchase common stock, this would reduce its return on investors' capital (ROIC). If a change in the bankruptcy code made bankruptcy less costly to corporations, this would tend to reduce corporations' debt ratios.
Which of the following statements is CORRECT? The debt ratio that maximizes expected EPS generally exceeds the debt ratio that maximizes share price. O Increasing its use of financial leverage is one way to increase a firm's return on investors' capital (ROIC). If a company were to issue debt and use the money to repurchase common stock, this would reduce its return on investors' capital (ROIC). If a change in the bankruptcy code made bankruptcy less costly to corporations, this would tend to reduce corporations' debt ratios.
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
Section: Chapter Questions
Problem 1PS
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
Transcribed Image Text:Which of the following statements is CORRECT?
O The debt ratio that maximizes expected EPS generally exceeds the debt ratio that maximizes share
price.
O Increasing its use of financial leverage is one way to increase a firm's return on investors' capital
(ROIC).
O
If a company were to issue debt and use the money to repurchase common stock, this would reduce
its return on investors' capital (ROIC).
O If a change in the bankruptcy code made bankruptcy less costly to corporations, this would tend to
reduce corporations' debt ratios.
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