A Type of Agency Problem That Results in Shareholders Gaining

question 39

Multiple Choice

A type of agency problem that results in shareholders gaining by choosing not to finance new,positive-NPV projects is:

• A)asset substitution.
• B)debt overhang.
• C)excessive risk-taking.
• D)distress costs.

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Definitions:

Creativity

The ability to produce original and valuable ideas, involving imagination and the generation of new solutions to problems.

Hearing

The sensory process by which sound is received, interpreted, and understood by the auditory system.

Mirror Neuron

A neuron that fires both when an individual acts and when the individual observes the same action performed by another, thereby playing a role in learning and empathy.

Neuron Fires

The process by which a neuron transmits an electrical and chemical signal to another neuron.