In 2018, Abacab Inc. announced plans to alter its capital structure by redeeming $100 million par...
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In 2018, Abacab Inc. announced plans to alter its capital structure by redeeming $100 million par value of its preferred shares at par. The dividend rate on these shares was about 7.50% of par value. Consequently, after the redemption, the portion of net income going to Abacab's common shareholders will be substantially increased. Explain the impact of this redemption on the earnings response coefficient of Abacab's reported net income. In 2018, Abacab Inc. announced plans to alter its capital structure by redeeming $100 million par value of its preferred shares at par. The dividend rate on these shares was about 7.50% of par value. Consequently, after the redemption, the portion of net income going to Abacab's common shareholders will be substantially increased. Explain the impact of this redemption on the earnings response coefficient of Abacab's reported net income.
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The earnings response coefficient ERC measures the relationship between a companys reported net inco... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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