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Describe and discuss the underinvestment problem.
Multiple choice are:
it is essentially the mirror image of asset substitution
shareholders refuse to undertake a low-risk positive-NPV investment because debtholders would gain at shareholders’ expense
debtholders’ would gain from the investment because the probability that they will be fully repaid increases
an investment with a large-enough positive NPV can overcome the problem of underinvestment
A and B
A and C
A and D
B and C
B and D
C and D
all but A
all but B
all but C
all but D
all are true
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