1) A corporation may choose to use debt financing because a) it has an income tax advantage. b) it typically has a higher cost of capital than equity. c) it carries voting rights. d) it reduces financial leverage.
1) A corporation may choose to use debt financing because a) it has an income tax advantage. b) it typically has a higher cost of capital than equity. c) it carries voting rights. d) it reduces financial leverage.
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 13MC: The cash interest payment a corporation makes to its bondholders is based on ________. A. the market...
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1) A corporation may choose to use debt financing because
a) it has an income tax advantage.
b) it typically has a higher cost of capital than equity.
c) it carries voting rights.
d) it reduces financial leverage.
2. The effective rate of interest on bonds
a) is the interest rate specified on the bond certificate.
b) is the market rate of interest when the bonds are actually sold.
c) is the market rate of interest on the date of public announcement.
d) none of these choices.
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