A benefit of issuing corporate bonds instead of common stock is: Group of answer choices they do not need to be repaid interest must be paid periodically no cash will be raised there is no loss of ownership

A benefit of issuing corporate bonds instead of common stock is: Group of answer choices they do not need to be repaid interest must be paid periodically no cash will be raised there is no loss of ownership

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which of the following statements correctly describe characteristics of preference shares? Group of answer choices A. The required return on preference equity is expected to be less than the required return from ordinary equity. B. None of the other statements are correct C. A participating preference share participates in the interest payments paid to debtholders. D. Preference shares are called “hybrid” securities because they display characteristics of both short-term and long-term debt.
Junk bonds earn their name because Question 7 options: a) they are riskier than higher rated bonds b) they are total investment junks c) they are considered untrustworthy d) investors will not be able to recoup their investment e) investors prefer other bonds over these bonds
An investor that owns convertible bonds in a deteriorating company would realize a higher return on his/her investment by converting the bond immediately before bankruptcy. True or False.
Preferred stock is a hybrid security, because it has some characteristics typical of debt and others typical of equity. The following table lists various characteristics of preferred stock. Determine which of these characteristics is consistent with debt and which is consistent with equity. Characteristics Debt Equity Has a par, or face, value. Failure to pay a preferred dividend does not send the firm into bankruptcy. Consider the case of Tamin Enterprises: At the present time, Tamin Enterprises does not have any preferred stock outstanding but is looking to include preferred stock in its capital structure in the future. Tamin has found some institutional investors that are willing to purchase its preferred stock issue provided that it pays a perpetual dividend of $14 per share. If the investors pay $130.45 per share for their investment, then Tamin’s cost of preferred stock (rounded to four decimal places) will be .
Preference shares have characteristics similar to bonds because it ______________ A. has a fixed monthly rate. B. has a fixed dividend amount. C. represents the ownership of the company. D. has no fixed dividend amount.
True or False An asset or stock with a beta less than 1.0 means the stock is more risky than the market in general. Bonds that have a callable feature allow the bond holder to convert their debt to common shares of stock. Bond holders have voting rights and common shareholders do not. Bond holders have first claim on assets in the event of a bankruptcy, so they are less risky than common stock. An ordinary annuity is preferred by investors because they receive their payment at the beginning of each period.
1. Why do high yield fixed income investors favor PIK bonds for companies who are about to enter a restructuring
An advantage of bonds is O Bonds do not affect owner control O Bonds require payment of par value at maturity O Bond payments can be burdensome when income and cash flow are low O Bonds can decrease return on equity
Explain why company managers might choose to issue zero-coupon bonds instead of interest-bearing bonds or coupon bonds instead of zero- coupon bonds? Give pros and cons of each. Be sure to consider the situation from the bond issuer's viewpoint and not the bondholder.