B is not the answer.

VULLE 1 Check My Work 2 Which of the following is NOT a reason suggested for why it might make sense for companies to manage risks? a. Risk management can reduce the likelihood of low cash flows, hence of financial distress. b. Our tax system encourages risk management to stabilize earnings because companies with volatile earnings pay more taxes than more stable companies. O c. Firms must concentrate on stabilizing cash flows because hedging input costs does not add much value for stockholders nor is it beneficial to managers, d. In years when internal cash flows are low, they may be too smail to support the optimal capital budget, causing firms to either slow investment below the optimal rate or else incur the high costs associated with external equity. By smoothing out cash flows, risk management can alleviate this problem e. Firms can use derivatives called "swaps" to reduce the interest rate on debt, which should add value to the firm