When a firm's investment decisions have different consequences for the value of equity and the value of debt,managers may take actions:
A)to increase debt values.
B)to decrease costs of distress.
C)that benefit shareholders at the expense of debt holders.
D)that benefit debt holders at the expense of shareholders.
E)to reduce fixed costs.

Question

Quizplus · Accepted Answer

Managers may prioritize actions that increase shareholder value, even if it negatively impacts debt holders, due to their fiduciary duty to shareholders.

When a Firm's Investment Decisions Have Different Consequences for the Value