Chang Industries Has Bonds Outstanding with a Par Value of $200,000

question 80

Multiple Choice

Chang Industries has bonds outstanding with a par value of $200,000 and a carrying value of $203,000.If the company calls these bonds at a price of $201,000,the gain or loss on retirement is:

• A)$1,000 gain.
• B)$2,000 loss.
• C)$3,000 gain.
• D)$1,000 loss.
• E)$2,000 gain.

Understand the relationship between the returns required by investors and the firm's cost of capital components.

Recognize the significance of market values in calculating the cost of capital over book values.

Know the concept of target capital structure and its relevance to the WACC.

Learn how the marginal cost of capital (MCC) and investment opportunity schedule (IOS) guide capital budgeting decisions.

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