Shweser Qbank: Corp Finance question
Financial leverage would NOT be increased if a firm financed its next project with:
A) common stock.
B) preferred stock.
C) bonds with embedded call options.
That is all information provided with the question.
Unless the firm is currently UN-leveraged, I don’t think any of the above answer make sense?
Or does anyone have a better explanation than:
The correct answer was A) common stock.
Financial leverage is the result of financing assets with fixed income securities such as bonds or preferred stock. Each of these alternatives has a required payment component that increases the risk of the firm beyond that arising solely from business risk. |
发表于 2013-4-17 18:58
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