The CFO of Mulroney Brothers Has Suggested That the Company

Multiple Choice

The CFO of Mulroney Brothers has suggested that the company should issue $300 million worth of common stock and use the proceeds to reduce some of the company's outstanding debt. Assume that the company adopts this policy, and that total assets and operating income (EBIT) remain the same. The company's tax rate will also remain the same. Which of the following will occur:

A) The company's net income will increase.
B) The company's taxable income will fall.
C) The company will pay less in taxes.
D) All of the answers above are correct.
E) Answers b and c are correct.