The Cost of ________ Is Highest for Firms That Can

question 48

Multiple Choice

The cost of ________ is highest for firms that can easily increase the risk of their investments.

• A)asset substitution
• B)debt overhang
• C)debt covenants
• D)debt maturity

---

Definitions:

Principal-Agent Problems

Issues that arise when a principal hires an agent to perform tasks, and the agent's best interest does not align with the principal's.

Human Capital

The skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value to an organization or society.

Apprenticeship Training

A system of training a new generation of practitioners of a trade or profession through on-the-job training and often some accompanying study (classroom work and reading).

Investment in Human Capital

Refers to the process of improving the workforce's skills, knowledge, and abilities through education, training, and health interventions to enhance productivity and economic growth.