Which of the Following Is NOT an Advantage of Issuing

question 194

Multiple Choice

Which of the following is NOT an advantage of issuing bonds instead of common stock?

• A) Taxable net income is reduced
• B) Earnings per share of common stock may be lower
• C) Stockholder control is not affected
• D) Income to common stockholders may increase

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Definitions:

Straight-Line Depreciation

A technique for spreading the expense of a physical asset evenly across its operational lifespan each year.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Present Value Method

A financial calculation that determines the current worth of a future sum of money or stream of cash flows given a specific rate of return.

Ignore Present Value

A decision to not consider the current worth of future cash flows or payments, often applied in financial analysis.