Firms Are More Likely to Restrict Borrowing If The

question 60

Multiple Choice

Firms are more likely to restrict borrowing if the:

• A) return on the financed project is too high.
• B) firm's asset base is largely intangible.
• C) firm's asset beta is zero.
• D) increased debt decreases the firm's WACC.

---

Definitions:

Decision-Making

The process of making choices by identifying a decision, gathering information, and assessing alternative resolutions.

Vivid Observations

Highly detailed and clear observations, typically used to convey intricate details in a way that is easy to visualize and understand.

Asymmetric Information

A scenario where one participant in a deal possesses greater or more advanced information than the other.

Adverse Selection

A situation where uneven information leads to transactions between parties where one party has more or better information than the other, often seen in insurance markets.