One of the indirect costs to bankruptcy is the incentive toward underinvestment.Following this strategy may result in
A) the firm always choosing projects with positive NPVs.
B) stockholders turning down low-risk, low-return but positive NPV projects.
C) the firm declaring and paying high-cash dividends.
D) stockholders turning down low-risk, low-return but positive NPV projects, and the firm declaring and paying high-cash dividends.
Correct Answer:
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