Which of the following is likely to happen in the MM model with a high risk of bankruptcy?

Question

Quizplus · Accepted Answer

In the MM model with a high risk of bankruptcy, valuable projects may be foregone to preserve cash. This is because the risk of bankruptcy makes it difficult to secure financing for new projects or investments, so the company may opt to conserve cash instead. Almost 100% debt financing (choice A) is not a guaranteed outcome and would be very risky in a high risk of bankruptcy scenario. Wasteful expenditures (choice C) are not necessarily more likely in this situation. Management buying back shares from the open market (choice D) may help improve the company's financial position, but this action alone is unlikely to address the risk of bankruptcy.

Which of the Following Is Likely to Happen in the MM