What factors, other than the current interest rate at which new debt could be sold, should a manager consider when deciding to refund a bond issue?
Answer to relevant QuestionsWhy is it considered important whether a lease is classified as an operating lease or as a financial (or capital) lease? A problem with collateral is that its value is positively correlated with the borrower’s ability to repay. Explain. What are the key advantages of leasing as compared to borrowing to acquire an asset? What are the key disadvantages of leasing? How do Miller and Modigliani (M&M) arrive at their conclusion that dividend policy is irrelevant in a world of frictionless capital markets? Why is the assumption of fixed investment policy crucial to this conclusion? If high- dividend stocks offer a higher expected (and required) return than low- dividend stocks, due to the higher personal taxes levied on the former, why don’t corporations simply reduce dividend payments and thus lower ...
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