Question3 Not yet asswered Marked out of z.so Flag qontion MCQ: Taggart Technolo

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Question3 Not yet asswered Marked out of z.so Flag qontion MCQ: Taggart Technologies is considering issuing new common stock and using the proceeds to reduce its outstanding debt. The stock issue would have no effect on total assets, the interest rate Taggart pays, EBIT, or the tax rate. Which of the following is likely to occur if the company goes ahead with the stock issue? Select one: O a. The ROA will decline. O b. Taxable income will decrease. O c. The tax bill wil increase O d. Net income will decrease O e. The times interest earned ratio will decrease Next page Previous page TOSHIBA

Explanation / Answer

Ans 3 option C , tax bill will increase as interest will decrease (as debt is decreased) so EBT will increase and hence tax bill will increase

Ans 4 option D

So interest will decrease as discussed above and tax will increase , but net effect will be increase in net income .

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