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Nelson Automotive is considering issuing new common stock and using the proceeds to reduce its outstanding debt. The stock issue would have no effect on total assets, the interest rate Nelson pays, EBIT, or the tax rate. Which of the following is likely to occur if the company goes ahead with the stock issue?a. Net income will decrease.b. The times interest earned ratio will decrease.c. The ROA will decrease.d. The tax bill will increase.e. Taxable income will decrease.
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