Indicate whether each of the following is an advantage or a disadvantage of using long-term bond financing
Question:
Indicate whether each of the following is an advantage or a disadvantage of using long-term bond financing rather than issuing common stock.
1. Interest paid on bonds is tax deductible.
2. Investment are sometimes not as successful as planned.
3. Financial leverage can have a negative effect when investments do not earn as much as the interest payments on the related debt.
4. Bondholders do not have voting rights in a corporation.
5. Positive financial leverage may be achieved.
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