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Cards In This Set
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A Bond can only be easily refunded if it has a call feature.
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TRUE
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A financing lease usually calls for an annual expense deduction equal to the lease payment.
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FALSE
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A floating rate bond has a reasonably stable price but actual interest payments received change often over the life of a bond.
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TRUE
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Because of legal problems associated with specific asset claims in a secured bond offering, the trend is for companies to issue more debentures.
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TRUE
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During economic upswings, spreads between bonds of different ratings tend to widen.
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FALSE
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Long-term bond prices are more volatile than short-term bond prices given an equal percentage change in the interest rate.
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TRUE
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Over the decades, the times interest earned ratio for the Standard and Poor's 500 corporations has held fairly steady.
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FALSE
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Senior debentures usually provide lower interest rates than junior secured debt.
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FALSE
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The difference between the initial bond price and the maturity value is amortized for tax purposes over the life of a zero-coupon bond.
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TRUE
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The fact that interest payments on debt are fixed is both an advantage and drawback.
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TRUE
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The inclusion of leases on the balance sheet as an asset and liability has lowered firms' debt to asset ratio.
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FALSE
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The weighted average cost of capital is generally used as the discount rate in a bond-refunding decision.
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FALSE
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Although firms can elect to use straight-line depreciation, the MACRS depreciation schedules have superseded other depreciation methods for tax purposes.
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TRUE
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Capital budgeting decisions involve a minimum time horizon of five years.
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FALSE
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Capital rationing is generally a positive action for a firm because it prevents rapid growth which can drive up the cost of capital.
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FALSE
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