One of the Indirect Costs of Bankruptcy Is the Effect

Multiple Choice

One of the indirect costs of bankruptcy is the effect that a potential bankruptcy has on the firm's decisions.The general result is that:

A) the firm will rank all projects and select the project which results in the highest expected firm value.
B) bondholders expropriate value from stockholders by selecting high-risk projects.
C) stockholders expropriate value from bondholders by selecting high-risk projects.
D) the firm will always select the lowest-risk project available.
E) the firm will select only all-equity financed projects.