Which of the Following Statements Is False

question 28

Multiple Choice

Which of the following statements is false?

• A) The agency costs of debt can arise only if there is no chance the firm will default and impose losses on its debt holders.
• B) Agency costs represent another cost of increasing the firm's leverage that will affect the firm's optimal capital structure choice.
• C) An under-investment problem occurs when shareholders choose to not invest in a positive-NPV project.
• D) When a firm faces financial distress, it may choose not to finance new, positive-NPV projects.

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Definitions:

Eleven Months

A period of time consisting of eleven consecutive calendar months.

Inspect

To look at something or someone carefully in order to detect faults or understand the details.

Objects

Physical items or entities that can be perceived by human senses and have a defined shape or form.

Cerebrum

The largest part of the human brain, responsible for voluntary motor functions, sensory perception, thought, reasoning, and memory.