Capital structure to finance new project

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Reference no: EM132047182

1. Bryco, Inc. is financed solely with equity. The firm is considering utilizing debt in its capital structure to finance a new project. If the firm issues debt, the credit rating will be AAA. The firm should increase its financial leverage because

Interest payments are tax deductible

With little debt, the probability of default should be extremely low, so the expected cost of bankruptcy is very low.

Management currently owns 50% of the stock and by issuing debt, management can maintain control of the firm.

All of the above

2. The Cookie Co. would like to sell 500 shares of stock using the Dutch auction method. The bids received were BidderA, 200 shares at $40; Bidder B, 300 shares at $39; Bidder C, 500 shares at $38; and Bidder D, 400 shares at $37. What will be the gross proceeds from this auction?

Reference no: EM132047182

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