Transaction Costs Exist Because

question 14

Multiple Choice

Transaction costs exist because:

• A)the information is costly.
• B)the information is asymmetric.
• C)we need to define property rights.
• D)the information is asymmetric and costly to obtain.

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Definitions:

Tax Shields

Deductions and credits available to taxpayers that lower the total tax liability by reducing taxable income.

Equity Risk

The risk of loss arising from fluctuations in the values of equity investments.

Operating Activities

Business actions that relate to the company's day-to-day functions, contributing to the generation of revenue.

Debt-Equity Ratio

A metric that shows the balance between the amount of equity provided by shareholders and the debt incurred to support a company's operations, commonly utilized to evaluate its financial leverage.