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.
To finance the call, the firm will use current retained earnings, ...
The solution discusses each of the options regarding financing the call and explaining the result for each.