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What types of firms would we expect to observe higher direct agency costs of equity, such as consuming excessive perquisites by management ?   Question 7 options:   a)  Firms with high free cash flows   b)  Firms with fewer growth opportunities   c)  Firms with weak governance structures   d)  All of the above options are correct   e)  None of the options are correct

Which of the following statements is false? Group of answer choices a.If management does not consider the needs of the bondholders of a firm, they could end up destroying shareholder value b.If management chooses to ignore the needs of bondholders when structuring a firm, the firm can be expected to have to pay a higher interest rate on its debt                                                    c.In a perfect capital market, if a firmʹs current capital structure is not optimal, one can expect that firm to be a takeover target d.Management should focus only on the needs of a firmʹs shareholders since they are the true owners of the firm and, as such, they elect the firmʹs directors

Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and bondholders?   a. Compensating managers with stock options.     b. Abolishing the Security and Exchange Commission.     c. The use of covenants in bond agreements that limit the firm's use of additional debt and constrain managers' actions.     d. Financing risky projects with additional debt.     e. The threat of hostile takeovers.

Many firms have devised defenses that make it more difficult or costly for other firms to take them over. How might such defenses affect the firm's agency problems? Are managers of firms with formidable takeover defenses more or less likely to act in the shareholders' interests rather than their own? What would you expect to happen to the share price when management proposes to institute such defenses?

A Moving to another question will save this response. Question 6 According to the risk shifting (or asset substitution) hypothesis Shareholders are keen to take excessively risky projects as they do not internalize the negative externality to bondholders O Firms should never pay dividends O Companies become too conservative in their investment when debt levels are such that bankruptcy is a likely outcome O It is always optimal to reduce leverage as this reduces expected bankruptcy costs A Moving to another question will save this response. ipeg WhatsApp Image..jpeg WhatsApp Image.jpeg WhatsApp Image...jpeg WhatsApp Image..jpeg WhatsApp Im. Shot on vivo Z1x 00 16°C Mostly cloudy WIDE Vivo Al camera

It is generally argued that the takeover constraint  deters management from engaging in opportunistic behavior.deters management from considering acquiring other companies.deters management from declaring dividends.deters management from increasing a firm’s level of borrowing.

2.322Both investors and companies employ leverage (borrowed capital) whenattempting to generate greater returns on their assets. However, using leveragedoes not guarantee success, and possible excessive losses are more likely fromhighly leveraged positions. The excessive use of leverage has attracted mediaattention as a result of its impact on shareholders as well as the public as awhole.Required:Provide a publicised example of the use of too much leverage as well as providingyour advice on what might have been done to prevent the collapse of thecompany.

Which of the following is NOT related to (or contributes to) business risk? Remember that a company's activities have an effect on its business risk. Sales price variability. The extent to which operating costs are fixed. Demand variability. O Input price variability. O The extent to which interest rates on the firm's debt fluctuate.

2 (a)There is a conflict of interest between stockholders and managers. In theory, stockholders are expected to exercise control over managers through the annual meeting or the board of directors. In practice, why might these disciplinary mechanisms not work? (b)There are some corporate strategists who have suggested that firms focus on maximizing market share rather than market prices. When might this strategy work, and when might it fail? (c)It is often argued that managers, when asked to maximize stock price, have to choose between being socially responsible and carrying out their fiduciary duty. Do you agree? Can you provide an example where social responsibility and firm value maximization go hand in hand?

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The use of financial leverage by the firm has a potential impact on which of the following?             (1) The risk associated with the firm's operations.             (2) The risk experienced by the stockholders             (3) The variability of operating income             (4) The variability of net income             (5) The probability of going bankrupt Group of answer choices: 1, 2, 3 1, 3, 5 3, 4, 5 2, 3, 4 2, 4, 5

Suppose you need additional capital to expand,and you sell some stock to outside investors. If youmaintain enough stock to control the company,what type of agency conflict might occur?

which one is correct please confirm? QUESTION 21 Finance researcher Myron Gordon argues that ____.   a. the clientele effect has no influence on share value   b. the existence of transaction costs has no impact on the dividend decision   c. dividends reduce uncertainty, and thus the payment of dividends will increase the firm's value   d. risk-averse shareholders may prefer some dividends over the promise of future capital gains if the interest rate is expected to decline

TRUE or FALSE: Managers always attempt to maximize the long-run value of their firms' stocks, or the stocks' intrinsic values. This is exactly what stockholders desire. Thus, conflicts between stockholders and managers are not possible.

Indicate whether its TRUE or FALSE. Then provide a complete explanation! Financial risk is reflected in the variability in the returns a company may generate on its assets and is mainly driven by the risks inherent in the industry that the company operates in. Introducing leverage into a firm’s capital structure may increase the expected returns for shareholders but the impact on share price may still be uncertain.

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