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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

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 INCREASE its need to issue new common stock?

a.

Increase the percentage of debt in the target capital structure

b.

Decrease the dividend payout ratio for the upcoming year

c.

Decrease the proposed capital budget

d.

Reduce the percentage of debt in the target capital structure

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