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Several years ago, Boeing increased its debt financing because its financial managers calculated that the firm would benefit from having additional debt. Suppose these managers
Several years ago, Boeing increased its debt financing because its financial managers calculated that the firm would benefit from having additional debt. Suppose these managers were correct and the firm's value increased. Which of the following statements is accurate?
- a.The increase in value accrues to existing stockholders in the form of higher share values.
- b.New investors who purchase Boeing's new bonds will incur a capital loss because the likelihood of financial distress has increased.
- c.The increase in value accrues to bondholders because the bonds are now safer.
- d.The increase in value accrues to both stockholders and bondholders.
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