Which of the Following Statements Best Describes Debt

question 44

Multiple Choice

Which of the following statements best describes debt?

• A) 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.
• B) The key benefits associated with refunding debt are the reduction in the firm's debt ratio and the creation of more reserve borrowing capacity.
• C) 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.
• D) 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.

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Definitions:

Marketing Messages

Communications aimed at informing, persuading, or reminding consumers about a product, service, or brand.

Fact Sheet

A concise presentation of key facts, figures, and points about a specific topic, often used in public relations and marketing.

Desire Phase

In marketing, the stage where a consumer develops a favorable inclination towards a product or service, following awareness and interest.

Persuasive Call

A telephone conversation aimed at convincing or influencing the listener to take a specific action or adopt a particular viewpoint.