Which of the Following Statements Is FALSE

question 108

Multiple Choice

Which of the following statements is FALSE?

• A)When a firm faces financial distress,creditors can gain by making sufficiently risky investments,even if they have negative NPV.
• B)When a firm has leverage,a conflict of interest exists if investment decisions have different consequences for the value of equity and the value of debt.
• C)In some circumstances,managers may take actions that benefit shareholders but harm the firm's creditors and lower the total value of the firm.
• D)Agency costs are costs that arise when there are conflicts of interest between stakeholders.

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Definitions:

Buzzing Sound

A continuous, low-pitched noise resembling the sound produced by bees or similar insects.

Right Frontal Lobe

A region of the frontal lobe of the brain located in the right hemisphere, responsible for controlling important cognitive skills, such as emotional expression, problem-solving, memory, and judgment.

Amygdala

A region of the brain key to processing emotions, particularly fear and pleasure.

Fearless

Lacking fear; having the quality or ability to face danger or unknown situations without succumbing to fear.