Question

10. Issuing which of the following financial securities to raise cash will have the most significant impact on the issuing company's income tax expense?

a. Preferred Stock

b. Common Stock

c. Corporate Bonds

d. More than one have approximately the same impact

e. None of the financial securities have any impact on income tax expense.....

Answer 1

Correct Answer is option C)
Corporate Bonds
When company issue debenture, they will get the interest tax shield benefit. Interest payment on Bonds is tax deductable.
In preference stock or common stock they don't have get any tax sheilds.
Mostly, company issue Debentures or bonds when they are confident about the project and they want to pay only a fixed amount of payment to bonds holders and rest of the aomunt to be enjoy by shareholers.

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