Cornwall Corporation Is Planning to Raise $1,000,000 to Finance a New

Cornwall Corporation is planning to raise $1,000,000 to finance a new plant. Which of the following statements is CORRECT?

A) if debt is used to raise the million dollars, but $500,000 is raised as first mortgage bonds on the new plant and $500,000 as debentures, the interest rate on the first mortgage bonds would be lower than it would be if the entire $1 million were raised by selling first mortgage bonds.
B) if two tiers of debt are used (with one senior and one subordinated debt class) , the subordinated debt will carry a lower interest rate.
C) if debt is used to raise the million dollars, the cost of the debt would be lower if the debt were in the form of a fixed-rate bond rather than a floating-rate bond.
D) if debt is used to raise the million dollars, the cost of the debt would be higher if the debt were in the form of a mortgage bond rather than an unsecured term loan.
E) the company would be especially eager to have a call provision included in the indenture if its management thinks that interest rates are almost certain to rise in the foreseeable future.

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