A Corporation Undertaking an Expansion Project Issues 20 Year Bonds

question 276

Multiple Choice

A corporation undertaking an expansion project issues 20 year bonds to finance the project. Which of the following is most likely true?

• A) The company does not need to make payments on the bonds unless it has positive earnings for the year.
• B) The company has borrowed money and must pay interest on the amount borrowed.
• C) The company did not have any outstanding bonds when it issued the new bonds.
• D) The bonds must have sold at a premium since expansion projects are generally risky.
• E) If the company could have issued preferred stock instead, they would have.

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