Final answer:
Bankruptcy can be valuable for a firm because it halts payments to creditors during proceedings and can be strategically used to better the firm's market position. The correct answer is d) Both b and c.
Step-by-step explanation:
Bankruptcy is very valuable because payments to creditors cease pending the outcome of the bankruptcy process, and it can be used strategically to improve a firm's competitive position. Unlike the idea that it makes capital structure policy irrelevant in terms of firm valuation, bankruptcy offers a firm a reprieve from the immediate financial pressures and can, in some cases, provide an avenue for restructuring and revitalization.
A bond issuer typically promises to make scheduled payments over time, and failure to do so may result in the company declaring bankruptcy and liquidating its assets to pay creditors. However, companies often file for bankruptcy and continue operating to reorganize and manage their debts more effectively.