A valuable firm will tend to: a. see its stock price increase if it issues debt

Question

A valuable firm will tend to:

a. see its stock price increase if it issues debt beyond its optimal debt level.

b. issue more debt than a less valuable firm of comparible size.

c. reduce its debt level as a positive signal for the firm.

d. issue debt, but only on a temporary basis purely to fool investors regarding the firm's value.

e. see its stock price increase when it announces an exchange offer that decreases its leverage.

A valuable firm will tend to:

a. see its stock price increase if it issues debt beyond its optimal debt level.

b. issue more debt than a less valuable firm of comparible size.

c. reduce its debt level as a positive signal for the firm.

d. issue debt, but only on a temporary basis purely to fool investors regarding the firm's value.

e. see its stock price increase when it announces an exchange offer that decreases its leverage.

Explanation / Answer

c ) reduce its debt level as a positive signal for the firm

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