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?
A) The ROA will decline.
B) Taxable income will decline.
C) The tax bill will increase.
D) Net income will decrease.
E) The times-interest-earned ratio will decrease.

Question

Quizplus · Accepted Answer

?a is false because reducing debt will lower interest,raise net income,and thus raise ROA.b is false for the above reason.c is true for the above reason.d is false The TIE will increase because interest charges will be smaller due to less debt.

Taggart Technologies Is Considering Issuing New Common Stock and Using