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Basic Question 11 of 15
Managers might choose to issue debt to signal the prospects of the firm because
B. issuing more equity would dilute EPS.
C. debt issuance is a costly signal that must be supported by sufficient levels of earnings.
A. the floatation costs on debt are less than equity.
B. issuing more equity would dilute EPS.
C. debt issuance is a costly signal that must be supported by sufficient levels of earnings.
User Contributed Comments 2
| User | Comment |
|---|---|
| phillip | B is a correct statement but not a correct answer here: Issuing more equity would dilute EPS, but it is not the reason why managers want to issue debt to signal the prospects of the firm. |
| REITboy | Good comment, philip. |
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Edward Liu
Learning Outcome Statements
describe optimal and target capital structures
CFA® 2025 Level I Curriculum, Volume 2, Module 6.