The Advantages of Obtaining Long-Term Funds by Issuing Bonds,rather Than

question 50

Multiple Choice

The advantages of obtaining long-term funds by issuing bonds,rather than issuing additional common stock,include which of the following?

• A)Interest payments are tax deductible to the company,while dividends are not.
• B)The risk of going bankrupt decreases.
• C)Expansion is achieved without surrendering ownership control.
• D)a.and c.

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Definitions:

Optimal R&D

The most efficient level of investment in research and development activities that maximizes the benefits from new knowledge and products.

Expected Rate Of Return

The estimated gain or loss of an investment over a given period, expressed as a percentage.

Interest-Rate Cost-Of-Funds

The cost to borrowers or the rate paid to savers and investors based on the interest rates in the financial markets or the rate of return required on investment funds.

Marginal Cost Curve

A graphical representation depicting the cost added by producing one more unit of a particular good, often upward sloping due to increasing costs.