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Which of the following statements is FALSE? Select one: a. Because more than one debenture might be outstanding, the bondholder's priority in claiming assets in
Which of the following statements is FALSE? Select one: a. Because more than one debenture might be outstanding, the bondholder's priority in claiming assets in the event of default, known as the bond's seniority, is important. Ob. When a firm conducts a subsequent debenture issue that has lower priority than its outstanding debt, the new debt is known as a subordinated debenture. O c. Most debenture issues contain clauses restricting the company from issuing new debt with equal or lower priority than existing debt. In the event of default, the assets not pledged as collateral for outstanding bonds cannot be used to pay off the holders of subordinated debentures until all more senior debt has been paid off. O d. Which of the following statements is FALSE? 1. In-the-money real options should be exercised immediately when the option to delay is worth less than the NPV of undertaking the investment today. 2. With a constant interest coverage policy, we can calculate the present value of the interest tax shield without knowing the cost of debt. 3. The hurdle rate rule raises the bar on accepted projects by using a lower discount rate than the cost of capital to discount projects' cash flows. Select one: O a. Statement 3. O b. Statement OC Statements 1, 2 and 3. Od Statements 2 and 3
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