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Finance the Call: Best Options

The available options of the firm with an overhanging issue to finance the call do NOT include which of the following:

Selling additional debt resulting in a higher debt ratio,
Using current retained earnings,
Selling additional common equity resulting in less dilution of eps, or
Selling additional preferred stock resulting in higher financial leverage

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To finance the call, the firm will use current retained earnings, ...

Solution Summary

The solution discusses each of the options explaining the result for each.