You wish to invest $10,000 in the ABC Company. You have a choice of either buying company shares

of common stock or 10-year non-callable bonds issued by the company.

Give 2 reasons (and only 21) why you would prefer to invest in ABC bonds rather than in ABC stocks.

Explain your answers.

The XYZ Company is looking for $10 Million in additional capital to finance the construction of a new

plant. Its manager is hesitating between raising the $10 Million in additional long-term debt or in

additional common equity. Give 2 reasons (and only 2!) why XYZ would prefer financipg the plant

with long-term debt rather than equity. Explain your answers.