When faced with financial distress; managers of firms acting on behalf of their shareholders' interests will:
A) favor high risk, high return projects even if they have negative NPV
B) refuse to invest in low risk, low return projects with positive NPVs
C) delay the onset of bankruptcy as long as they can
D) all of the above

Question

Quizplus · Accepted Answer

Managers may favor high-risk projects hoping for high returns to avoid bankruptcy, avoid low-risk projects with positive NPVs due to insufficient returns, and delay bankruptcy to protect shareholders' interests.

When Faced with Financial Distress; Managers of Firms Acting on Behalf