With its current financial policies, Flagstaff Inc. will have to issue new common stock to fund...

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With its current financial policies, Flagstaff Inc. will have to issue new common stock to fund its capital budget. Since new

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Answer 1

Answer #1

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Increase the percentage of debt in the target capital structure

Increasing debt will reduce the amount required to be raised from equity and hence, will avoid issue costs

Reducing % debt, increasing dividend payout ratio and increasing capital budget will lead to increase in the need to raise new equity.

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Answer 2

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