Question 28 Which one of the following is a logical assumption concerning capita

Question

Question 28

Which one of the following is a logical assumption concerning capital structure weights?

The weights are constant over a year.

A new bond issue will increase the weight of the firm's debt.

The redemption of a bond issue will increase the weight of the firm's debt.

The issuance of additional shares of common stock will not change the weight of the preferred stock

The weights are constant over a year.

A new bond issue will increase the weight of the firm's debt.

The redemption of a bond issue will increase the weight of the firm's debt.

The issuance of additional shares of common stock will not change the weight of the preferred stock

Explanation / Answer

Issuance of Bond will increase the Market Value of Debt Of the Firm. Increase in Market Value will Increase the weight of the firm's debt.

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