1. Market evidence suggests that four main factors influence firm’s financing decisions. Briefly explain how each of the factors below appear to affect the decision to use debt as a funding source.
1. Profitability
2. Firm size
3. Tangible assets
4. Growth opportunities
2. Robinson's has 32,000 shares of stock outstanding with a par value of $1 per share and a market price of $46 a share. The balance sheet shows $32,000 in the common stock account, $445,000 in the paid in surplus account, and $390,000 in the retained earnings account. The firm just announced a 5-for-2 stock split. How many shares of stock will be outstanding after the split?
A. 12,800 shares
B. 79,500 shares
C.128,000 shares
D. 80,000 shares
E. 67,200 shares