Bankston Corporation forecasts that if all of its existing financial policies are followed, its proposed capital budget would be so large that it would have to issue new common stock. Since new stock has a higher cost than retained earnings, Bankston would like to avoid issuing new stock. Which of the following actions would REDUCE its need to issue new common stock?

Question

Quizplus · Accepted Answer

Increasing the percentage of debt in the target capital structure would reduce the need to issue new common stock because it allows the company to finance more of its capital budget with debt rather than equity.

Bankston Corporation Forecasts That If All of Its Existing Financial