To a company,the cost of interest payments on its bonds is reduced by the amount of tax savings generated by that interest.

Question

Quizplus · Accepted Answer

This statement is true because interest payments on bonds are tax-deductible expenses, which reduce the company's taxable income and therefore decrease the amount of taxes it has to pay. The tax savings generated by the interest payments can offset some of the costs of borrowing and make the bonds more attractive to investors.

To a Company,the Cost of Interest Payments on Its Bonds