Which of the Following Statements Is True

question 10

Multiple Choice

Which of the following statements is true?

• A)Bond covenants serve to protect bondholders at the expense of firm value.
• B)Bond covenants can serve to maximize firm value, which means shareholder value is also maximized.
• C)Although bond covenants may serve to maximize firm value, they destroy shareholder value.
• D)None of the above is a true statement.

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Definitions:

Tender Offer

A proposal made publicly by an individual or company to purchase shares from shareholders of a public corporation at a specified price within a certain time frame.

Net Gain

The positive difference between the sale price of an asset after deducting all costs associated with the sale and the original purchase price, reflecting a financial benefit.

Synergy Value

The additional value generated by combining two companies or assets, where the value of the whole is greater than the sum of the individual parts.