Discuss who bears the bankruptcy costs in the event of a corporate bankruptcy? Pay careful attention to the impact on selection optimal capital structure.

Part B

Discuss the Short Sighted Investment problem as it relates to equity holders expropriating debt holder wealth.

Part C

Discuss the Reluctance to Liquidate problem as it relates to equity holders expropriating debt holder wealth.

Part D

Critically discuss how Management Control may serve to distort Investment Decisions. Make use of 2 specific situations or examples to illustrate your case.

Part E

Explain the advantages and disadvantages in allowing management discretion. Specifically refer to ownership structure as well as stability of the environment.

Answer rating: 100% (QA)

Part A In case of a corporate liquidation the expenses are borne by different partners including lenders investors representatives providers and clientsCreditors are likely to suffer the most as a res... View the full answer