Continue to operate the firm as a going concern

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Reference no: EM131022025

The equity of a firm can be viewed as a call option on the firm's assets. Under what circumstance should the managers of the firm, acting in the best interests of the firm's shareholders, exercise their option by making promised payments to bondholders and continue to operate the firm as a going concern?

If the value of the debt is less than the value of the equity

If the value of the debt is greater than the value of the equity

If the value of the debt is equal to the value of the equity

If the value of the assets is greater than the face value of the debt

If the value of the assets is less than the face value of the debt

Reference no: EM131022025

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