One advantage of issuing bonds instead of stock is that:Multiple ChoiceOInterest is tax deductible, whereas dividends are notBonds have a longer maturity date.Interest rates are lower than dividend rates.Borrowing funds by issuing bonds does not affect earnings per share.

Bonds are the securities which are issued by the entities in order to raise capital for the…

Answered: One advantage of issuing bonds instead…

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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when are corporations likely they called the Bonds? A. When the market interest rate is higher than the contract rate, b. When the contract rate is higher than the market rate. C. When their bonds at selling at par with market d. When standard and poor are bullish about treasury bills E. None of the above
When a corporation invests borrowed money in assets that generate profits greater than the after-tax cost of the debt, it increases the return on equity for common shareholders. creates financial leverage. has a mix of debt and equity in its capital structure. does all of these options. If the effective rate of interest is greater than the contract rate, the bonds will sell at par. a premium. a discount. any of these choices, depending on other circumstances.
Which is not a benefit of debt to the corporation?a. interest payments are tax deductibleb. when debt is used heavily, it increases stock valuec. In periods of inflation, debt is paid back with amounts that are worth less than the ones borrowed.d. compared to equity, debts have a lower cost of capitale. answer not given
Both EV-to-EBITDA and PE multiples can be linked to interest rates through the discount rate used in discounted cash flow valuation. Holding all else equal, when discount rates are higher, valuation ratios are lower. Perhaps because of this, we tend to see stock prices as well as, the value of private business transactions decline when interest rates increase. Macroeconomists like to describe interest rates as consisting of two components: the real interest rate component and an expected inflation component. In some situations, increases in interest rates are the result of an increasing real interest rate; in other situations, the cause of an interest rate increase is an increase in expected inflation. How might valuation ratios be expected to respond to an interest rate increase generated by an increase in expected inflation versus an interest rate increase that represents an increase in real interest rates?
The yields on a corporate bond differ from those on a comparable treasury security primarily because of
Corporate bonds are riskier than US Treasury, so they pay default risk premium over what Treasury pays to stay competitive in the market. True False
please explain
The values of Treasury bonds can change widely with changes in interest rates. True False
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
Which of the following events would make it less likely that a company would choose to call its outstanding callable bonds? O The company's financial situation improves significantly. O Ratings on the company's bonds are upgraded. O Inflation decreases significantly. Market interest rates decline sharply. O Market interest rates rise sharply.

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One advantage of issuing bonds instead of stock is that: Multiple Choice O Interest is tax deductible, whereas dividends are not O Bonds have a longer maturity date. Interest rates are lower than dividend rates. Borrowing funds by issuing bonds does not affect earnings per share.