Question
Multiple choice: High-growth firms will have lower debt to value ratios than low growth firms because a) low growth firms have lower potential bankruptcy costs
Multiple choice:
High-growth firms will have lower debt to value ratios than low growth firms because
a) low growth firms have lower potential bankruptcy costs
b) the amount of debt that can be added today is limited by the current ability to pay, not the increase in firm value from greater growth
c) high-growth firms are usually less well managed and more volatile than low growth firms leading to higher probabilities of financial distress
d) the present value of future opportunities potentially lost under the conditions of financial distress is usually greater for the high-growth firms
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