Chunky Chicken, Inc., announced yesterday that it plans to issue $100 million in debenture bonds to fund the expansion of its fast food chain of restaurants. In financial terms, this means:

A. The corporation will borrow $100 million worth of long-term financing. The bond issue will not carry any collateral. B. The corporation will issue $100 million worth of equity financing. The bond issue will be backed by the property and buildings purchased with the funds. C. The corporation will borrow $100 million worth of long-term financing. The issue will be backed by the property and buildings purchased with the funds. D. The corporation will issue $100 million worth of interest free bonds. Financiers will be paid from the revenues created by the individual franchises.

Question

Allyson Lang

Business

5 July, 23:23

Chunky Chicken, Inc., announced yesterday that it plans to issue $100 million in debenture bonds to fund the expansion of its fast food chain of restaurants. In financial terms, this means:

A. The corporation will borrow $100 million worth of long-term financing. The bond issue will not carry any collateral. B. The corporation will issue $100 million worth of equity financing. The bond issue will be backed by the property and buildings purchased with the funds. C. The corporation will borrow $100 million worth of long-term financing. The issue will be backed by the property and buildings purchased with the funds. D. The corporation will issue $100 million worth of interest free bonds. Financiers will be paid from the revenues created by the individual franchises.

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Answers (1)

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Jaylan Riggs · Answer 1

A. The corporation will borrow $100 million worth of long-term financing. The bond issue will not carry any collateral.

Explanation:

The reason is that debentures are the long term borrowings at a fixed rate of interest. Debentures are long term finance source for the borrowers and carries no collateral with it. This means that in the given scenario, the company will borrow $100 million worth of long term financing and as debenture carry no collateral the right option is A.