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Indirect costs of bankruptcy

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One of the indirect costs of bankruptcy is the incentive for managers (on behalf of the shareholders) to take large risks. When following this strategy, the firm will:

A. Rank all projects and take the project that results in the highest expected value of the firm.

B. Rank all projects and take the project that results in the highest expected value of the firm's bonds.

C. Rank all projects and take the project that results in the highest expected value of the firm's stock.

D. Always take the low risk project.

E. Both A and B

Reference no: EM132504432

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