Which of the Following Is Not an Example of an Agency

question 40

Multiple Choice

Which of the following is not an example of an agency problem?

• A)Firms are not as levered as shareholders would like them to be, due to fears of insolvency and possible bankruptcy.
• B)Managers have discretion over whether or not to take on risky projects.
• C)Managers can maintain control over a greater free cash flow by avoiding debt in their firm's capital structures.
• D)Investors do not have perfect information about the value of their investments.

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Definitions:

Excise Tax

A tax charged on specific goods and services, such as alcohol, tobacco, and gasoline, usually to discourage their use or generate revenue.

Equilibrium Price

The price in a competitive market at which the quantity demanded and the quantity supplied are equal, there is neither a shortage nor a surplus, and there is no tendency for price to rise or fall.

Federal Income Tax

Federal income tax is the tax levied by the national government on individuals and organizations' annual earnings.

Taxpayers

Individuals or entities obligated to pay taxes to governmental authorities.