Consider this decision tree,which represents the outcomes of two alternative projects that Ink,Inc.,a producer of printers,might pursue.Ink,Inc.,needs to borrow $1,000 to pursue either project and is going to sell bonds to finance the venture. 
Under these circumstances,bondholders and shareholders may have incompatible incentives because:
Definitions:
Quality Cost Report
A document that outlines the costs associated with ensuring the quality of products or services, including prevention, appraisal, and failure costs.
Appraisal Cost
The expenses associated with ensuring quality and compliance of products or services, including testing, inspections, and audits.
Quality Cost Report
A financial report detailing the costs associated with ensuring product or service quality, including prevention, appraisal, and failure costs.
Internal Failure Cost
Expenses incurred when a product fails to reach quality standards before it is delivered to the customer, including scrap and rework costs.
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