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Explain the agency cost of cost of debt

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Reference no: EM132684932

Agency theory assumes that individuals act only in their own self-interest and mechanisms should be put in place to ensure that actions that benefit the individual also benefit the organisation.

Problem I) Explain the agency cost of cost of debt?

Problem II) What do the principals (lenders) do to stop the agent acting in their own self-interest to reduce agency costs?

Reference no: EM132684932

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