What are the important direct and indirect costs of bankruptcy? Which of these, do you think, are the most important for discouraging maximum debt use by corporate managers?
Answer to relevant QuestionsSuppose an individual borrows from a bank to buy a new car. Later on, the borrower realizes that in a few months, he will have to default on this loan and the bank will repossess the car. What kind of underinvestment problem ...What factors, other than the current interest rate at which new debt could be sold, should a manager consider when deciding to refund a bond issue? What aspect of syndicated lending is most attractive to the lenders? The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds. In each case, the firm is in the 40 percent ...Why is it difficult for a firm with weaker cash flows to mimic a dividend increase undertaken by a firm with stronger cash flows?
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