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.