When a Firm's Investment Decisions Have Different Consequences for the Value

question 45

Multiple Choice

When a firm's investment decisions have different consequences for the value of equity and the value of debt, managers may take actions ________.

• A) to increase debt values
• B) to decrease costs of distress
• C) that benefit shareholders at the expense of debt holders
• D) to reduce fixed costs

---

Definitions:

Judgment

A formal decision or conclusion by a court or judge, resolving a dispute between parties in a legal case.

Obtained

Acquired or secured something, typically through effort or request.

Cause Of Action

A set of facts or legal basis that enables one party to sue another.

Province

A principal administrative division of certain countries, especially in Canada, which is characterized by its own government and boundaries.