Question: 10. i. What is agency problem? State three features that contribute to the existence of agency problem. ii. Explain why shareholders prefer debt financing

10. i. What is agency problem? State three features that contribute to

10. i. What is agency problem? State three features that contribute to the existence of agency problem. ii. Explain why shareholders prefer debt financing to equity financing as an attempt to reduce agency problem. 11. Why should investors view the issuance of stock as a negative signal when managers want to raise finance for a project? Explain how investors can deal with this situation. Explain the main difference between financial leverage and operating leverage. Which categories of investors bear these risks?

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