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:

Marketing

The process of promoting, selling, and distributing a product or service.

Sales Messages

Communications designed to inform or persuade customers about a product or service.

Adapting Guidelines

Modifying or adjusting rules or instructions to suit a particular situation, context, or purpose.

Marketing Messages

Communications designed to inform, persuade, or remind potential customers about a product, service, or brand.