Bankruptcy is the incentive toward under investment

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Reference no: EM13895407

One of the indirect costs to bankruptcy is the incentive toward underinvestment. Following this strategy may result in:

A. the firm always choosing projects with the positive NPVs.

B. the firm turning down positive NPV projects that it would clearly accept in an all equity firm.

C. bondholders contributing the full amount of the investment, but only stockholders reaping the benefits of the project.

D. Both A and C.

E. None of the above.

Reference no: EM13895407

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