Which of the Following Statements Is Most CORRECT

question 24

Multiple Choice

Which of the following statements is most CORRECT?

• A) The key benefits associated with refunding debt are the reduction in the firm's debt ratio and the creation of more reserve borrowing capacity.
• B) The mechanics of finding the NPV of a refunding decision are fairly straightforward.However, the decision of when to refund is not always clear because it requires a forecast of future interest rates.
• C) If a firm with a positive NPV refunding project delays refunding and interest rates rise, the firm can still obtain the entire NPV by locking in a low coupon rate when the rates are low, even though it actually refunds the debt after rates have risen.
• D) Suppose a firm is considering refunding and interest rates rise during time when the analysis is being done.The rise in rates would tend to lower the expected price of the new bonds, which would make them cheaper to the firm and thus increase the expected interest savings.
• E) If new debt is used to refund old debt, the correct discount rate to use in the refunding analysis is the before-tax cost of new debt.

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Definitions:

Cultural

Relating to the ideas, customs, and social behavior of a society or community, shaping its identity and practices.

Symbols

Objects, signs, or emblems used to represent ideas, beliefs, or entities, playing a significant role in communication and culture.

Peace Sign

A symbol representing peace, commonly made with the palm and fingers of one hand.

Cultural Survival Kit

A metaphorical concept referring to the set of tools, practices, beliefs, and knowledge that a culture develops to survive and thrive in its environment.