Which One of the Following Statements Is TRUE

question 23

Multiple Choice

Which one of the following statements is TRUE?

• A) a corporate executive health club is an example of a nonpecuniary benefit.
• B) when lenders protect themselves from the risk of asset switching by raising the interest rate, the firm's wacc can decrease.
• C) a lender calling in a corporate loan and then lending the funds out to a safer borrower is an example of asset switching.
• D) a supplier substituting a lower-quality raw material without approval is an example of asset switching.
• E) an agency problem occurs when an owner/manager sells stock to an outside investor and the owner/manager fears the outside investor will consume too many perquisites.

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Definitions:

Positive

Positive refers to characteristics, events, or outcomes that are beneficial, favorable, or desirable.

Negative Consequences

Undesirable outcomes that result from an action or decision, potentially acting as a deterrent for future similar actions.

Approach-Avoidance Conflict

A psychological struggle occurring when a goal is both appealing and disconcerting to an individual.

Approach-Approach Conflict

A psychological dilemma occurring when an individual must choose between two desirable outcomes.