Final answer:
Issuing bonds can indeed result in tax savings for a company because interest payments are tax-deductible, unlike dividends paid on common stock.
Step-by-step explanation:
It is true that issuing bonds instead of common stock can result in tax savings. When a firm chooses to issue bonds, it commits to paying scheduled interest payments. These interest payments are considered a business expense and are, therefore, tax-deductible. On the other hand, when a firm issues common stock, any dividends paid to shareholders are not tax-deductible. Hence, through issuing bonds, a firm can decrease its taxable income and thereby save on taxes. This is in contrast to issuing stock, where the company sells a part of its ownership and must also cater to the interests and demands of new shareholders.