Bankston Corporation forecasts that if all of its existing financial policies are adhered to,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 action would reduce its need to issue new common stock?

Question

Quizplus · Accepted Answer

By increasing the percentage of debt in the target capital structure, Bankston Corporation would be able to finance more of its proposed capital budget through debt rather than equity. This would reduce the need to issue new common stock and avoid the higher cost of equity financing.

Bankston Corporation Forecasts That If All of Its Existing Financial