Question

bonds are very popular means of financing long term investments in infrastructure. what advantages do they have over the sale of company shares?

Answer 1

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Companies have a number of options for raising capital. Here are several popular methods:
Retain earnings.
Sell assets.
Issue shares.
Issue bonds.
When a company issues bonds, it's borrowing money from investors in exchange for interest payments and an IOU.
Issuing bonds is much cheaper than issuing shares. When a company sells new shares, the value of its existing shares is diluted. Since shareholders take on more risk than bondholders (in the event of a bankruptcy they're further back in line to receive compensation), shareholders require a higher rate of return than do bond investors.
One other advantage borrowing money has over issuing shares is that it can reduce the amount of taxes a company owes. That's because the interest a company pays its lenders is counted as an expense, which means pre-tax profits are lower. Issuing shares, on the other hand, may be more expensive to company as they may have to pay dividend which is not classified as expenses on an income statement and so they are no tax deductible.