Adverse selection is a problem when companies issue equity. It is also, famously, a problem in the market for ______________.

A.construction aggregate

B.debt

C.used cars

D.lemons

When there is a debt overhang, companies will reject positive NPV projects.

True

False

What is the name given to the conflict between lenders and owners where a company accepts a negative NPV project?

A.Reluctance to Liquidate Problem

B.Asset Substitution Problem

C.Debt Overhang Problem

D.Shortminussighted Investment Problem