Question
In general, how is the increase in the value of the firm produced by a positive net present value project distributed between the firm's creditors
In general, how is the increase in the value of the firm produced by a positive net present value project distributed between the firm's creditors and shareholders? (Note that the firm's value has increased by the positive net present value of the project.)
A. | The total positive net present value of the project accrues to shareholders. | |
B. | The total positive net present value accrues to creditors. | |
C. | The positive net present value is distributed proportionately between creditors and shareholders based on the relative proportions of their holdings in the firm. | |
D. | The creditors receive their interest payments from the project and shareholders receive the principal. |
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