An Advantage of Bond Financing Is

question 34

Multiple Choice

An advantage of bond financing is:

• A) Bonds do not affect owners' control.
• B) Interest on bonds is tax deductible.
• C) Bonds can increase return on equity.
• D) It allows firms to trade on the equity.
• E) All of these.

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Definitions:

Fixed Costs

Costs that do not change with the level of production or business activity, such as rent, salaries, and loan payments.

Estimated Sales Price

The anticipated amount for which a product or asset would sell in the current market.

Discounted Payback Period

The time it takes for the cash flows from an investment to equal the initial cost of the investment, accounting for the time value of money.

Variable Cost

Charges that directly correspond to changes in the amount of business activity or production levels.