Firms Facing Financial Distress May Pass Up Positive NPV Projects

question 48

Multiple Choice

Firms facing financial distress may pass up positive NPV projects rather than commit new equity because:

• A) they prefer to finance with debt.
• B) the benefits may be shared with the bondholders.
• C) no cash is available for dividends.
• D)there is no interest tax shield associated with equity.

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Definitions:

Participative Management Style

A management approach involving employees in decision-making processes, aiming to increase employee engagement and satisfaction.

Incompetent Manager

A leader or overseer lacking the necessary skills, qualities, or abilities to effectively manage or direct.

Autocratic Decision-making

Autocratic decision-making is a leadership style where decisions are made by a single authority figure without consultation or input from others.

North American Managers

Individuals in supervisory or executive positions within organizations located in North America, responsible for directing and overseeing business operations.