1. Reasons to manage risk Ae Aa Firms deal with different types of risk in their day-to-day operations and adopt risk management strategies. It is important to understand why firms manage risk Theoretically, financial management strategies should be undertaken when they increase the price of the firm's common stock. This means that your analysis of a risk management strategy should also involve an examination of the consladences of the strategy on the firm's free cash flows and its WACC True or False: For the strategy to increase the firm's share price, it should decrease the firm's expected future free cash flows and/or decrease its WACC O False O True In certain cases, bondholders and shareholders hedge their investments individually to meet their desired risk management objectives. This is often referred to as a homemade hedge. The use of ahomemade hedge by wel-diversified investors car the benefits of risk management activities undertaken by the fim. Detroit Diesel Services compeny hes appled risk management techniques in an aeffort o reduce the volatility of its cash flows and to decrease the probability of its bankruptcy which of the folowing objectives is management attempting to achieve through its use of risk management techniques? check all that apply ? Improve its ability to attract lower-cost debt capital and expand its debt capacity El Develop comparative advantage in hedging ? Improve management's opportunities for earning bonuses and additional eompensation