BUSN $488$T $-$ BBA Outbound

Business Finance $-$ Stocks and Bonds

The CFO of Daves Industries plans to have the company issue $$300$ million of new common stock and use the

proceeds to pay off some of its outstanding bonds that carry a $7\%$ interest rate. Assume that the company,

which does not pay any dividends, takes this action, and that total assets, operating income $($EBIT$),$ and its tax

rate all remain constant. Which of the following would occur?