Which of the Following Is a Major Advantage of Debt

Multiple Choice

Which of the following is a major advantage of debt financing?

A) Market interest rates on debt normally do not exceed 5 percent, which is much lower than market rates associated with common stock.
B) Interest payments on debt are a tax-deductible expense to the issuing firm.
C) Generally, interest payments on debt are based on the firm's net income, which means the interest is not paid unless the firm has enough income to cover the payments.
D) Normally the market values of bonds remain fairly stable, whereas common stock prices change substantially every day.
E) Firms that use great amounts of debt do not pay much in corporate taxes.