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Memphic Memphic
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6 years ago
In an agency problem known as debt overhang, if the company has risky debt outstanding, equity holders will choose to invest only if:
A) the NPV of the project exceeds a cutoff equal to the relative riskiness of the firm's debt times its debt-equity ratio.
B) the profitability index of the project exceeds a cutoff equal to the relative riskiness of the firm's debt times its debt-equity ratio.
C) the NPV of the project is negative.
D) the debt holders will lose all their money.
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
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EgorGruzdevEgorGruzdev
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6 years ago
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6 years ago
this is exactly what I needed
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You make an excellent tutor!
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Helped a lot
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