Examples of agency costs are The total dividends paid to shareholders over the l
ID: 2649557 • Letter: E
Question
Examples of agency costs are
The total dividends paid to shareholders over the lifetime of the firm
The costs that result from default and bankruptcy of the firm
Corporate income subject to double taxation
The costs of the conflict of interest between stockholders and management
The total interest paid the creditors over the lifetime of the firm
1.The total dividends paid to shareholders over the lifetime of the firm
2.The costs that result from default and bankruptcy of the firm
3.Corporate income subject to double taxation
4.The costs of the conflict of interest between stockholders and management
5.The total interest paid the creditors over the lifetime of the firm
Explanation / Answer
Agency cost are those cost which are internal to an organization and are paid when an agent acts on behalf of principal. One such example of agent-principal relationship is managment and shareholders in which management is agent and shareholders are principal. These cost arise due to conflict between management and shareholders. Thus, the correct option is Option 4, The costs of the conflict of interest between stockholders and management.
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