CIMA Exam CIMAPRA19-F03-1 Topic 4 Question 7 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 7
Topic #: 4

A company is currently all-equity financed.

The directors are planning to raise long term debt to finance a new project.

The debt:equity ratio after the bond issue would be 30:60 based on estimated market values.

According to Modigliani and Miller's Theory of Capital Structurewithouttax, the company's cost of equity would:

Astay the same.

Bdecrease.

Cincrease.

Dincrease or decrease depending on the bond's coupon rate.

Show Suggested Answer

Suggested Answer: C

by Sharee at May 06, 2022, 07:01 AM

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