7. When a company's management recognizes that the likelihood of bankruptcy has become non-trivial, the company's manage

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7 When A Company S Management Recognizes That The Likelihood Of Bankruptcy Has Become Non Trivial The Company S Manage 1 (324.15 KiB) Viewed 34 times

7. When a company's management recognizes that the likelihood of bankruptcy has become non-trivial, the company's management, acting in the interests of the stockholders of the company, may be tempted to ... a. Shift the company's investments into riskier investments to increase the expected payoff to the stockholders if things go well, whereas the debtholders bear more of the risk of the investments, if things go poorly b. Refuse to contribute more equity into the troubled firm because the contribution may benefit the debtholders more than the positive NPV of the investment made with the cash c. Pull some funds out of the firm, paying dividends or repurchasing stock, while the firm is still "healthy" d. All of the above.