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Unformatted text preview: ities to improve its fund-raising activities. The
financial manager can use these securities, which possess characteristics of both debt and
equity, to raise funds more inexpensively or to provide for desired future changes in the
firm’s capital structure.
Leasing, particularly financial (capital) leases, may enable the firm to use the lease as a
substitute for the debt-financed purchase of a given asset. Because of differing tax brackets
of lessors and lessees, different tax treatments of leases and purchases, and different risks
and borrowing costs for lessor and lessee, leasing may provide more attractive risk–return
tradeoffs to the firm than would result from using debt financing to purchase a given asset.
Similarly, by issuing convertible rather than straight debt or by attaching stock purchase
warrants to a bond issue or debt financing, the firm may provide lenders with the potential
to benefit from stock price movements in exchange for being charged a lower interest rate
or including less r...
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This document was uploaded on 01/19/2014.
- Fall '13