The Lottadoe Corporation Is Considering Financing Some New Long-Term Investments

question 13

True/False

The Lottadoe Corporation is considering financing some new long-term investments by issuing additional long-term debt. One disadvantage of this approach is that it locks the firm into making fixed payments that could create cash flow problems if the firm's earnings are lower than expected.

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Definitions:

Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's initial cost.

Invest

The act of allocating resources, usually monetary, in the expectation of generating an income or profit.

Annual Return

The percentage change in an investment's value over a one-year period, including dividends or interest.

Education Fund

A savings or investment account set up for the purpose of paying for educational expenses.