Â The reason why the cost of capital is used for the evaluation of the decision to refund a bond and also explain the reason behind it. Introduction: Bond: It is a long-term loan borrowed by the corporations, organizations, and the government for the purpose of raising capital. It is issued at a fixed interest depending upon the reputation of the corporations and also termed as fixed-income security. Bond refunding: It means paying off higher-cost debt bonds to the issuer of the bonds with a lower net cost. This decreases the financial cost of any firm.

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Chapter 16, Problem 14DQ

Summary Introduction

To explain:Â The reason why the cost of capital is used for the evaluation of the decision to refund a bond and also explain the reason behind it.

Introduction:

Bond:

It is a long-term loan borrowed by the corporations, organizations, and the government for the

purpose of raising capital. It is issued at a fixed interest depending upon the reputation of the

corporations and also termed as fixed-income security.

Bond refunding:

It means paying off higher-cost debt bonds to the issuer of the bonds with a lower net cost. This decreases the financial cost of any firm.

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