Question: I am not sure about the answer. Is that right? Could you help me? Dynron Corporation's primary business is natural gas transportation using its vast


I am not sure about the answer. Is that right? Could you help me?


Dynron Corporation's primary business is natural gas transportation using its vast gas pipeline network. Dynron's assets currently have a market value of $150 million. The rm is exploring the possibility of raising $50 million by selling part of its pipeline network and investing the $50 million in a ber-optic network to generate revenues by selling high-speed network bandwidth. Whereas this new investment is expected to increase prots, it will also substantially increase Dynron's risk. If Dynron is levered, would this investment be more or less attractive to equity holders than if Dynron had no debt? Ci )1. Less attractive: Equity hciders in a levered rm will prefer that the firm reduce its risk to minimize the possibility of defauit. O B. More attractive: Equity hclders in a Ievered rm will benet from an increase in the risk cf the rm's investments. 0 C. Ne difference: Leverage has no effect an hcw attractive the investment is. ID D. Less attractive: Having leverage will raise Dvnren's equity ccst cf capital, making new investments less attractive. IE} E. More attractive: The tax benets cf leverage will make the new investment more attractive
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
