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:

Federal Troops

Military forces operated and maintained by the federal government of a country.

Constitutional

Relating to the governing laws and principles that define the structure, roles, and powers of a government, typically outlined in a written constitution.

State Government

The governing authority of a state within a country, responsible for implementing local laws, policies, and managing public services and resources.

Presidential Emergency Power

Special authority granted to the President during times of national crisis, allowing for actions not normally permitted.