Answer:
The answer is: C) If someone deliberately understates costs and thereby causes reported profits to increase, this can cause the stock price to rise above its intrinsic value. The stock will probably fall in the future. Both those who participated in the fraud and the firm itself can be prosecuted.
Explanation:
The value of a corporation is usually determined by its future cash flows and if any part of those cash flows is altered, then the stock value will not be correct. Anyone who tampers deliberately any component of the cash flows to alter the corporation's value is committing fraud and he/she can be prosecuted along with the corporation.