Which of the Following Statements Is Most CORRECT

question 30

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.

---

Definitions:

Arrhythmia

Arrhythmia refers to any change from the normal sequence of electrical impulses in the heart, leading to irregular heart rhythms.

Tachycardia

A condition characterized by an abnormally fast heart rate, typically defined as exceeding 100 beats per minute in adults.

Bradycardia

Slow heart rate.

Auscultatory Gap

A temporary disappearance of sounds heard over the brachial artery when measuring blood pressure; occurs between the systolic and diastolic pressures.