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

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:
C) increase.
A) stay the same.
B) decrease.
D) increase or decrease depending on the bond's coupon rate.

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

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 7
Topic #: 4
[All CIMAPRA19-F03-1 Questions]

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:

Show Suggested Answer Hide Answer
Suggested Answer: C

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

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Jestine
10 months ago
Nah, it’s definitely A. No taxes involved here!
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Yoko
10 months ago
I think it might actually increase with more leverage.
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Teri
11 months ago
Wait, how can it stay the same with new debt?
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Stephane
11 months ago
Totally agree, it's all about the risk!
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Novella
11 months ago
Cost of equity stays the same according to M&M theory!
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Teri
11 months ago
This seems like a straightforward question about the responsibilities of the Routing Table Manager. I think I can handle this one.
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Eulah
11 months ago
Okay, let me think this through step-by-step. When working at heights, you need to consider factors that could impact safety and stability. Things like wind, temperature, and lighting conditions would definitely be important. I'm leaning towards D as the best answer.
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Stephaine
11 months ago
Ah, I remember learning about this in the last module. I think the best approach is to use the most specific @SuppressWarnings annotation to target the exact warnings we want to suppress.
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Odette
11 months ago
This question seems straightforward, but I want to make sure I understand the RESTCONF POST code and its potential outcomes before selecting my answers.
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