Under what conditions would a policy of maximizing the value of the firm not be the same as a policy of maximizing shareholders' wealth?
A)If the issue of debt increases the financial risk of the firm's equity
B)If the firm issues debt for the first time
C)If the beta of equity is positive
D)If an issue of debt affects the market value of existing debt

Question

Quizplus · Accepted Answer

If an issue of debt affects the market value of existing debt, it could alter the firm's overall value without necessarily aligning with maximizing shareholders' wealth, as it may impact the risk and return profile differently for shareholders.

Under What Conditions Would a Policy of Maximizing the Value