When a Stockholder's Stake Is Worthless the Firm Runs the Risk

question 75

Multiple Choice

When a stockholder's stake is worthless the firm runs the risk of:

• A)underinvestment because there isn't much capital for investment.
• B)overinvestment because there isn't much wealth at risk.
• C)having bondholders invoke the separation principle to obtain first rights on the firm's assets.
• D)none of these.

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Definitions:

Discriminatory Event

An occurrence where an individual or group is treated unfairly based on characteristics such as race, gender, age, or disability.

EEOC

The Equal Employment Opportunity Commission, a federal agency that administers and enforces civil rights laws against workplace discrimination.

Seek Revenge

The act of attempting to retaliate or inflict harm on someone in response to a grievance or harm suffered at their hands.

Company Assets

Resources owned by a company, both tangible and intangible, that have value and can be used to produce goods or services.