1. What would cause corporate management to obtain cash by issuing bonds instead of selling stock?
2. Which type of bonds would give management greater flexibility in formulating and controlling a corporation’s financial affairs?
3. In what situations would management be wise to issue additional common stock rather than bonds to meet long-term capital needs?
4. Why would management repurchase and retire a corporation’s bonds prior to their maturity?
5. CCH Corporation’s board of directors is considering authorization of a new bond issue. The controller notes that the bonds are callable at 101.6 at any time beginning five years after the date of the bond contract. What does this mean? What is the advantage of such a provision?