Managers and shareholders have different objectives

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Reference no: EM13966200

How does debt financing help reduce agency problem which arise when managers and shareholders have different objectives?

a. debt financing can help prevent managers from using excess cash on perquisites

b. debt financing may make managers too risk averse, therefore causing under investment in some risky but positive NPV projects

c. debt financing can help prevent managers from using excess cash on non-value adding acquisitions

D. Both A and C are correct.

Reference no: EM13966200

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