question 5 0.5 pts which of the following statements is correct? relative to proprietorships, corporations…

question 5 0.5 pts which of the following statements is correct? relative to proprietorships, corporations generally face fewer regulations, and they also find it easier to raise capital. stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns. stockholders in general would be better off if managers never disclosed favorable events and therefore caused the price of the firms stock to sell at a price below its intrinsic value. there is no good reason to expect a firms stockholders and bondholders to react differently to the types of assets in which it invests. one disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than are partners.

question 5 0.5 pts which of the following statements is correct? relative to proprietorships, corporations generally face fewer regulations, and they also find it easier to raise capital. stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns. stockholders in general would be better off if managers never disclosed favorable events and therefore caused the price of the firms stock to sell at a price below its intrinsic value. there is no good reason to expect a firms stockholders and bondholders to react differently to the types of assets in which it invests. one disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than are partners.

Answer

Brief Explanations:

  • Corporations face more regulations than proprietorships, so the first statement is false.
  • Stockholders benefit more from high - return risky projects as they have residual claim on profits, while bondholders have fixed payments, so stockholders should be happier with risky high - return projects compared to bondholders.
  • Stockholders are better off when favorable events are disclosed as it helps the stock price reflect intrinsic value, so the third statement is false.
  • Stockholders and bondholders have different risk - return profiles and react differently to asset types, so the fourth statement is false.
  • Corporate shareholders have limited liability compared to partners in a partnership, so the fifth statement is false.

Answer:

B. Stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns.