Suppose a company is choosing between bank loans and bonds. A bank is offering an interest rate of 4.5% to lend the money to the firm and requires the company to post collateral and comply with financial covenants. The firm also contacted an investment bank, which predicted that in current market conditions the company may be able to issue a bond of the same value as the bank loan at a 4% coupon. Which option would you pick if you were the CFO of the company?

Answer rating: 100% (QA)

In this scenario choosing the bond financing appears to be the better option for the company Heres w... View the full answer