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& Company A and Company B both issue bonds on the exact same date. The terms of the bond contracts are identical, as each company
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Company A and Company B both issue bonds on the exact same date. The terms of the bond contracts are identical, as each company issues 20-year bonds with face value of $1,000,000, a stated rate of 12%, and interest payable semi-annually. The market rate of Company A's bonds on the issue date is 8.57%, while the market rate of Company B's bonds on the issue date is 13.1%. All other things equal, which of the following are most likely to be true regarding the bonds issued? (Check ALL that apply) Company A's bonds sold for a higher price than Company B's. OOOOOOO Company A's bonds sold for a higher price than Company B's. Company A's first year cash outflows will be higher than Company B's. Company B's first year cash outflows will be higher than Company A's. Bond investors assess Company A to be more credit-worthy than Company B. Bond investors assess Company B to be more credit-worthy than Company A. Company B's annual interest expense will increase over the life of the bonds. Company B's annual interest expense will decrease over the life of the bonds. On its 12/31/20 balance sheet date, Bart Company has $30 million of long-term debt, of which $10 million is due to mature in late 2021. Bart Company plans to file its Form 10-K in late February. Which of the following scenarios would allow the company to classify the $10 million of debt due in 2021 as long-term debt on its 12/31/20 balance sheet (Check ALL that apply): The company intends to refinance the debt with a stock issue and raises $40 million of cash using a stock issuance in January 2021. The company intends to refinance all $10 million of its current debt with the same bank before the filing date. The company issues new bonds in January 2021 and intends to use the proceeds to pay down the debt in April 2021. The company has tentative plans to issue long-term bonds. The company comes to an agreement with its bank to refinance the debt when it comes due. The company issues new bonds in January 2021 and immediately uses the proceeds to pay down the debt. The company has a non-cancellable revolving line of credit for up to $15 millionStep by Step Solution
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