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RFD, a listed company, is considering making an investment in a risky new venture.

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RFD, a listed company, is considering making an investment in a risky new venture. RFD has a substantial cash surplus that will be used to acquire the necessary resources. It is unlikely that RFD would have been able to raise finance for this investment because the company is already highly geared.

Which of the following statements about stakeholders' conflicting interests are true?

A.

RFD's shareholders are exposed to the systematic risk from this project and the directors are exposed to total risk.

B.

RFD's lenders are likely to suffer a greater risk than RFD's equity investors.

C.

Neither RFD's shareholders or lenders are likely to have the means to prevent the directors from making this investment.

D.

RFD's existing employees are likely to enjoy a significant upside risk from this project.

E.

The diversification of RFD's interests will reduce the risks for all stakeholders.

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