M is a listed company. It is hoping to invest in a risky new venture. M has a substantial amount of cash to invest in the venture. M would have found it difficult to raise new finance
as it has a high level of gearing.
Which of the following statements about stakeholders’ conflicting interests are true?
A . M’s shareholders would only be exposed to the systematic risk from the investment in the new venture.
B . M’s credit rating is likely to fall as a result of this new venture.
C . The directors would only be exposed to the systematic risk from the investment in the new venture.
D . M’s diversification will mean less risk for the shareholders.
Answer: A,B