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

Question

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

A. The weights are constant over time.

B. A new bond issue will reduce the weight of the firm's   preferred stock.

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

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

A. The weights are constant over time.

B. A new bond issue will reduce the weight of the firm's   preferred stock.

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

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

Explanation / Answer

B. A new bond issue will reduce the weight of the firm's preferred stock.

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