Question
Which of the following is NOT TRUE about equity and debt? Question 28 options: Equity holders are protected by limited liability and their claim on
Which of the following is NOT TRUE about equity and debt?
Question 28 options:
| Equity holders are protected by limited liability and their claim on firm value is the residual amount that remains after the debt holders are paid. |
| Equity holders control the firm through voting rights and debt holders use the loan contracts to protect themselves. |
| Interest payments for debt are tax-deductible for the corporation. Dividend of stocks is not tax-deductible for the corporation but tax-deductible for investors of the firm. |
| Nonpayment of interest may result in creditors forcing the firm into bankruptcy. Therefore, firms should always issue equity instead of debt to finance their growing opportunities. |
| None of the above |
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