You are a management consultant for a 30-year old partner in a large law firm. in a meeting, your client says: "according to an article in the new york times, 57 percent of large law firms have a mandatory retirement age for partners in the firm. before they retire, partners are paid directly for the work that they do, and, as owners, they are entitled to a share of the profits of the firm. once they retire, partners do not receive either form of compensation. in light of this, i think we should eliminate mandatory retirement in order to gain a ‘competitive advantage’ in attracting high-quality lawyers to work for our firm. of course, you are the expert."

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.