Corporate Finance Question
Hi guys
What do you thinkg about this question
A firm has a capital structure of 60% debt and 40% equity and a dividend payout ratio of 50%. If a surplus results from first-pass pro forma financial statements based on estimated sales growth and assuming the capital structure and dividend payout ratio are maintained, which of the following changes in assumptions would eliminate any surplus in a single step?
A) The entire surplus will be used to pay down long-term debt.
B) The entire surplus will be used to repurchase common stock.
C) No change in assumptions is necessary.
Y |