Firms Facing Financial Distress May Pass Up Positive NPV Projects

question 8

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 are 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:

Phineas Gage

A historically significant individual in the study of neuroscience and psychology, whose personality changes after a traumatic brain injury helped scientists understand the brain's role in personality and behavior.

Frontal Lobe

The front part of the brain, which makes plans and considers decisions.

Big Five

A conceptual model in the field of psychology, highlighting five key personality characteristics: openness, conscientiousness, extraversion, agreeableness, and neuroticism.

Full Siblings

Individuals who share both biological parents, having a full genetic overlap of 50% on average from each parent.