The Stinson family owns a farm. Three alternatives exist for how to use the farm: a) Grow wheat. Wheat yield would be 70 bu/acre. The price of wheat is $3.50/bu and production expenses are $140/acre b) Grow Barley. Barley yield would be 50 bu/acre. The price of barley is $2.50/bu and production expenses are $150/acre c) Lease out the acres. the Neighbor will bay $80/acre but they will still have expenses of $35/acre.

Which of the following statements is correct? 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. potential conflicts between stockholders and bondholders are increased if a firm's bonds are convertible into its common stock. takeovers are most likely to be attempted if the target firm’s stock price is above its intrinsic value. one advantage of operating a business as a corporation is that stockholders can deduct their pro rata share of the taxes the firm pays, thereby eliminating the double taxation investors would face in a partnership.