Which One of These Should Be the Primary Appeal of Unused

question 26

Multiple Choice

Which one of these should be the primary appeal of unused debt capacity to a bidder firm?

• A)Ability to borrow additional funds to increase management bonuses
• B)Source of funding for negative net present value projects
• C)Increased funding for the payment of unsustainable dividends
• D)Tax savings resulting from increased interest expense on additional debt
• E)Debt funding for a golden parachute

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Definitions:

Coupon Rate

The interest rate on a bond that the issuer promises to pay to the bondholder until maturity.

Premium

The amount by which the price of something, especially a financial security, exceeds its principal or face value.

Interest Rates

The cost of borrowing money or the return on investment for savings, usually expressed as a percentage of the principal amount on an annual basis.

Bond Prices

The market price at which a bond is traded, influenced by interest rates, credit ratings, and the bond's term to maturity.