Answer Happy

A negative effect of the increase in debt in the capital structure to control the agency problem can be: Select one: O a. the excessive payment of corporate taxes due to the high interest on the debt. O b. the excessive investment of managers in projects even with a low NPV. O c. resulting in very high risk aversion in management, leading to little or almost no investment in capital projects, even with positive NPVs. This would cause stagnation or little growth of the firm. O d. a wrong signal that the firm is spreading the firm's risk among more shareholders.
Generally, the top management of companies prefers to pay stable dividends to avoid sending the wrong messages to their shareholders and the market in general. Select one: O a. TRUE O b. False