Which of the Following Statements Is False

question 60

Multiple Choice

Which of the following statements is false?

• A) When a firm faces financial distress, creditors can gain by making sufficiently risky investments, even if they have negative NPV.
• B) When a firm has leverage, a conflict of interest exists if investment decisions have different consequences for the value of equity and the value of debt.
• C) In some circumstances, managers may take actions that benefit shareholders but harm the firm's creditors and lower the total value of the firm.
• D) Agency costs are costs that arise when there are conflicts of interest between stakeholders.

---

Definitions:

Import Restrictions

Government-imposed controls or limitations on the quantity or value of goods that can be imported into a country, often to protect domestic industries.

Import Demand

The quantity of goods or services that domestic consumers or firms are willing to purchase from abroad at various prices.

Export Supply

The quantity of goods or services available from a country for sale to other countries, directly related to national production capacities and international demand.

Protective Tariff

A tax imposed on imported goods to protect domestic industries from foreign competition by making the imported goods more expensive.