1. Which of the following statements most appropriately describe how agency cost affect the firms choice structure? Explain. a. When firm owners borrow money they have an incentive to engage in excessive risk taking (that is investing in very risky projects). Since they are managing someone else money. b. When firm have very limited investment opportunities and little debt financing combine with wealth profit that provide them with free cash flow, their management team might squander the firms' earnings on questionable investments.
1. Which of the following statements most appropriately describe how agency cost affect the firms choice structure? Explain.
a. When firm owners borrow money they have an incentive to engage in excessive risk taking (that is investing in very risky projects). Since they are managing someone else money.
b. When firm have very limited investment opportunities and little debt financing combine with wealth profit that provide them with
2. What is the primary weakness of using EBIT-EPS analysis as a financing tool.
3. Why might firms who's sale level change drastically overtime, choose to use debt only sparingly in their capital structure
4. What does the term independence hypothesis means as it applies to capital structure theory
5. Explain how industry norms might be used by the finance manager in the design of the company's financing mix
note: if you can provide the source of the info, please indicate it. this will help me to further study each question. thank you!!
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