The CFO is proposing that her company issues equity to reduce leverage because the company's current leverage ratio is 40% and the CFO believes that lower leverage will increase company value. But a board member who is a CFO of another company noted that despite having a high leverage ratio, the company is mature and highly profitable, and has an investment-grade credit rating (rating of A-). This board member is arguing that the company does not need to issue equity to reduce debt. 1) Who is right, the CFO or the board member? Discuss.

Answer rating: 100% (QA)

The CFO and the board member present different perspectives on whether the company should issue equity to reduce leverage To determine who is right we need to consider several factors The CFOs viewpoi... View the full answer