Which One of These Statements Most Applies to a Firm

Multiple Choice

Which one of these statements most applies to a firm that is suffering from financial distress?

A) Bondholders will desire high risk projects in order to protect their investment.
B) Stockholders will increase their investment in the firm to protect their current investment.
C) Stockholders will generally prefer low-risk over high-risk projects.
D) Managers will tend to lower dividends in an effort to protect shareholder value.
E) Stockholders will bear the cost of selfish investment strategies through higher interest payments.