Which of Statements A) Through C) Regarding Costs of Financial

question 30

Multiple Choice

Which of statements a) through c) regarding costs of financial distress is FALSE?

• A) Both debt and equity unambiguously benefit from corporate risk hedging.
• B) Hedging can increase expected cash flows by reducing the costs of financial distress.
• C) Hedging can reduce debtholders' required return and hence the cost of capital to the firm.
• D) All of the above are true.
• E) None of the above are true.