1. studies indicate that the direct cost of bankruptcy is small. what are the direct cost? what are the indirect costs of bankruptcy? what types of firms are most exposed to these indirect costs? 2. when stockholders have little power over incumbent. managers, firms are likely to be underlevered. comment. 3. debt is always cheaper than equity?therefore, the optimal debt is all debt. how would you respond? 4. there is a significant cost to bankruptcy since the stock price essentially goes to zero. comment.