1.

What problem arises as a result of the separation of ownership and management of a firm?

A) Advocacy problem

B) Agency problem

C) Self-interest problem

D) Subordination problem

2.

Which of the following are acceptable criteria for determining the weights in the weighted average cost of capital?

A) Market value of the capital structure and historical costs of financing

B) Market value of the capital structure and the target mix of debt and equity

C) Using the after-tax cost of debt and the market value of the capital structure

D) Using the book value of the capital structure and the prior level of debt and equity

I need answer with clear explanation. Why the correct option is right and other are not then i will give you thumbs up in return. Direct answer will have thumbs down from me.

Please attempt these questions only when you know the solutions for sure. These are really important for me.