By raising capital at lower cost, bonds lower risk for ...

[lidoalex]

By raising capital at lower cost, bonds lower risk for shareholders.
 
  Indicate whether the statement is true or false

Question 2

The current value of a business firm is the present value of all its future profits.
 
  Indicate whether the statement is true or false

[mceravolo]

Answer to Question 1

F Bondholders have first claim on earnings, which means that shareholders will bear more risk when bonds are outstanding.

Answer to Question 2

T This is a reasonable way to characterize the value of a firm, though it is not easy to know the future in order to apply it.

[lidoalex]

Great answer, keep it coming

[jamesnevil303]

Thanks for the timely response, appreciate it