Question: 6. A company issues bonds saying that it will use the proceeds for a safe investment. Instead, it uses the proceeds for a risky investment.

6. A company issues bonds saying that it will use the proceeds for a safe investment. Instead, it uses the proceeds for a risky investment. Which of the following statements is true about this situation. a. this will result in a decrease in the value of the debt because the company is riskier. b. this will result in a decrease in the value of the equity because the company is riskier c. this will result in a lawsuit from the stockholders because it is bait and switch d. this will cause bondholders to convert their bonds to stock e. dividends will go up to compensate shareholders for their increased risk
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
